Posted on January 10, 2010.
Find out why fixed-rate bonds have become so popular If you have been considering a fixed rate bond recently, you may want to move because research on new Moneyfacts.co.uk has revealed that the average lifetime of a bond is only 23 days.
The increased demand has led to many fixed rate deals become fully subscribed in less than one month, as investors are now encouraged to "act quickly" if they want to get the best deals.
This is because in the last year, the maximum interest rate available on a fixed-rate bond for one year fell 6.70 percent to 3.95 percent according to Moneyfacts.co.uk, which despite the fall is always a good return on your investment over the instant access savings accounts.
While most fixed-rate bonds will require a lump sum, you are guaranteed a return at the end of your investment and you can choose to receive your interest either monthly, annually or at maturity.
With such a variety of bonds to choose between, you're almost spoiled for choice. Depending on your financial situation, a deposit of one year may better suit you needs or if you are looking for an investment over a long term relationship five years may be more suitable.
The good thing about fixed rate bonds is that you are rewarded with higher interest rates if you're willing to invest your money for a number of years and leave undisturbed until the bond has matured The typical rate of a fixed rate bond five years of about five percent.
With instant access savings account that you can expect an average of about two and three per cent mark. However, if you need easy access to your money, then this may be the way forward. But it is worth remembering that many providers offer competitive rates on these accounts because they include an introductory bonus which may be payable for the first year, or even just the first six months and once the bonus is more to pay, your savings might not be working so hard for you.
While many vendors claim they can offer the most competitive with fixed rate bonds, it is worth shopping around to compare deals to ensure you get the agreement is good for you. Sites like www.fairinvestment.co.uk and www.moneysupermarket.com have a range of fixed rate bonds that you can compare.
As comparison sites, it can also be helpful to talk an independent financial adviser to discuss this type of investment is good for you.
