Recent rate rises on expat savings accounts is seeing annual interest rates of over 4 per cent now on offer on 5 year fixed term deals. And rates are beginning to rise on shorter term deposits.
Guernsey-based Clydesdale Bank and Isle of Man-based Alliance & Leicester have recently introduced 5 year fixed term accounts offering 4.15%. While the Clydesdale offer is is on a minimum balance of £10,000, the Alliance & Leicester offer applies to a minimum balance of £5,000.
Lloyds TSB International in the Isle of Man has been offering 4% on a minimum balance of £10,000 on its 5 year fixed term deposit account since June 2011. However, it has now improved interest rates on its one, two and three year sterling fixed term deposits. The new rate for a one year fixed term is 3.1% (up from 2.5%); 3.2% for two years (up from 2.6%) and 3.3% (up from 3%) for three years. All rates apply to a minimum balance of £10,000.
One reason for the rate rises is the fact the bank has recently pushed back its forecasts of when the Bank of England will lift the base rate to the third quarter of 2012.
“During 2010 we saw a higher demand for longer term fixed term deposits as customers looked to take advantage of good rates at a time when base rates seemed unlikely to change soon. In early 2011, we saw interest shift to instant access products as expectations of base rate increases made customers nervous about locking into longer fixed terms. And now, over the last three months, we have seen demand for one year fixed term deposits increase as prospects of higher base rates in the short term have ebbed away,” explains Tony Wilcox, Managing Director – Expatriate Banking.
The international banking arm of Lloyds TSB believes expat savers share a view that the base rate will remain at its 0.5% historic low in the medium term. And, says the Bank, it is this view that’s prompted a surge in the popularity of one year fixed term deposits.
“Expat savers are becoming increasingly savvy in this low interest rate environment and many quickly moved their money into one year fixed term deposits as prospects of a flat-lining base rate increased,” says Wilcox.
In the last three months, Lloyds TSB International reports witnessing a 20% increase in demand for one year fixed term deposits. “Lloyds TSB’s economists expect that the Bank of England base rate won’t rise till the third quarter of 2012 at the earliest. So, providing expats don’t need access to a certain portion of their savings over this period, a good one year fixed term account seems like an attractive option,” adds Wilcox.
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