Finance Market Competition Makes Fixed Rate Bonds Look More Appealing, While ISA Rates Get Lower

August has been a significant month for the finance industry in the UK and Europe as a whole. While the Bank of England keeps their base rate at 0.5 percent and pumps another 50 million pounds into the UK economy in the name of quantitative easing, the European Central Bank (ECB) have announced that that they are holding their rates at 1 percent too.

Consequently, when it comes to savings this month, banks and building societies are showing signs of fierce competition. At a glance, it is clear that those who are looking to put their money away for a while are likely to benefit from this - especially where fixed rate bonds are concerned. For savers who go for a fixed return on their savings, there seem to be new options available every day with the average long term fixed rate being up more than 1.5 percent since the Bank of England announced their rate hold in the first week of August (according to telegraph.co.uk).

Fixed rate bonds allow savers to calculate the exact interest they will accumulate (after tax) by the end of the term established at the outset. Unlike ISAs and other savings accounts you cannot add money to a fixed rate bond over time, yet the benefit of such saving is best realised when one considers the high interest rates available last year (around 5 percent) compared to the current base rate of 0.5 percent. By comparison, ISAs are tax free and a certain amount of money can be added over time.

Interestingly, the rate hold has had a negative effect on ISAs, with the average rate being just 1.43 percent. Yet, as research published at thisismoney.co.uk shows there are as many as 200 savings accounts that are earning even less. For example, the Barclays Active Savings Account is offering an interest rate of 0.5 percent, whilst many are not much better with the Alliance and Leicester Instant Access boasting a rate of just 0.10.

But overall, according to The Telegraph at least, average savings accounts rates are said to have increased - but by a much smaller margin than fixed rate bonds. Of course, this fresh perspective on the finance industry and focus on fixed rate bonds, as well as the low Bank of England and ECB base rates are going to fuel this competition even more - meaning that for those with money to save, there should be a number of viable options to get the most out from it.

Paul Roberts writes about the best savings accounts, fixed rate bonds and ISAs.