Banks introduce stepped savings interest rate bonds

As UK base rates look set to continue to remain relatively low in the short to medium term a number of banks have stepped forward with stepped savings interest rate bonds. In effect these bonds will offer a guaranteed interest rate in year one which will step up in year two, year three, year four and year five. However, experts have warned investors to check out the quality of the providers as well as the terms and conditions associated with these bonds.

It is debatable as to whether UK base rates will remain relatively low for another five years with some expecting a potential double dip recession and then a significant bounce to anywhere up to 8% over the next two to three years. If this is the case then a stepped savings bond may not be the best way forward because ultimately savers could be locked into unattractive rates from year two onwards.

Many investors in the UK seem to be blinded by the short term attractions of various investment tools and savings instruments when in fact they should look towards the longer picture and the overall value to them. No financial institution in the UK will "give away" interest or returns which it does not feel offer a benefit to itself as well as customers.