Any savers prepared to lock their savings away for an extended period of time have the potential to earn the best interest rates on the savings market, according to financial analysts Moneyfacts.
The firm has revealed that interest rates paid on fixed rate bonds with relatively short fixed terms have been rising since last August.
However, despite increasing rates savers are still worse off than they have been in recent years as decent returns are still had to come by due to record lows to the Bank of England base rate which has been sat at 0.5% since March 2009.
The encouraging movement suggests the Bank rate will rise in the coming months which would be passed on to savers through improved returns on savings accounts.
According to Moneyfacts, savers can expect to lock in on a rate of 2.85% with the average one-year fixed rate bond which marks the highest levels in over a year.Savers seeking the best rates might want to consider a two-year bond, which currently pays an average of 3.42%. Go one step further with a three year fixed term and you could be earning a rate of 3.7%, and for the highest rates available, a five year bond for an average interest rate of 4.17%.
Michelle Slade, of Moneyfacts said that short term bonds are seeing the most significant increases and are currently the most popular bonds amongst savers.
However, she added that savers must ensure that this type of savings accounts is the best option for them before committing to a fixed rate bond, as making early withdrawals could lead to hefty penalties.
By Sam Gooch