Savers with money in fixed rate bonds face a steep fall in income when the products mature, according to research. Around 5.5m fixed rate bonds worth some £110bn are due to mature this year, with 581,000 at the end of June, according to high street bank HSBC.
But interest rates paid on the bonds have dropped across all investment terms, meaning consumers are likely to face a drop in returns that they can earn on their cash.
The fall in interest rates is particularly bad news for pensioners, who often use the products to generate an income during retirement.
People looking to reinvest money in a two-year fixed rate bond will see the sharpest fall in their returns, as the best rate currently available is just 3.7%, down from a top rate of 7.1% in June 2008.
Consumers who locked up their money in a three-year bond in June 2007 could get a market leading rate of 6.35%, but today the best rate available is just 4.15%, while top rates on one-year bonds have dropped from 3.9% 12 months ago to 3.1%.
Five-year fixed rate bonds have seen the smallest drop in the returns available, as banks and building societies continue to reward people who lock up their money for longer periods.But even with these products the market leading rate has fallen from 5.15% five years ago to 4.75% now.
