Investors Face £1bn Precipice on Fixed Rate Bonds
(firmenpresse) - LONDON, UNITED KINGDOM -- (Marketwired) -- 07/18/13 -- New analysis from HSBC reveals that fixed rate bond holders face a substantial savings precipice this year when they come to reinvest. Rates have fallen significantly - up to 2.47% on some products - and left savers with the prospect of a far lower income from their investments once their current deals have matured.
Bruno Genovese, Head of Savings at HSBC, comments:
"As an increase in interest rates continues to look further into the distance, the knock on downward pressure being applied to saving rates is affecting the incomes of investors.
"Many savers value the guaranteed income and security offered by fixed rate products. However, those who want to reinvest their savings from matured fixed rate products into comparable deals this year may find that their income drops significantly. Savers need to consider all available options and this may not be to simply reinvest their savings in a similar product.
"Diversifying savings portfolios to have a variety of products can ensure that investors lessen the impact of falling interest rates. At HSBC, we can offer a range of options which offer a more stable way to invest for long-term growth."
Almost 5.3 million fixed rate products worth nearly GBP 93 billion will mature in 2013, with the largest number due to mature in November (568,455). Of these products, 2.8 million have matured over the last six months, but the recent fall in rates means bondholders face a GBP 1 billion fall in income if they reinvest their savings pot into similar products (see table 1).
Total Income Falls
All fixed rate products have been affected by the drop in rates and now offer lower returns if savers were to reinvest their money into the best-buy products currently available (see table 2). However, the biggest falls in income will be felt by 3, 5 and 2 year bond holders with drops of 52%, 50% and 45% respectively. Last year, holders of 1 year and 18 month bonds saw a slight rise in income, however even these product holders can now expect a fall in income of 39% and 38% respectively.
The smallest fall in income will be felt by 6 month bond holders, but, at 12% this drop will still have a significant impact.
(i) = For fixed rate investments maturing in 2012 (ii) = Based on Best Buy rates in month of investment
Individual Investor Falls
As well as the biggest drop in overall income, holders of 3 year bonds will suffer the biggest drop in individual income. The average investment in these bonds currently stands at GBP 22,333 and if this were to be reinvested in the current best-buy products on offer, investors can expect a return of GBP 3,037 - a fall of GBP 1,576 compared to their last investment in 3 year bonds.
Fall in AERs
The fall in income across all fixed rate products is a result of a drop in average best-buy AERs available. The falls vary from 0.16% for 6 month bonds to 2.47% for 5 year bonds (see Table 3). Despite longer term bonds suffering the biggest falls in AERs, these products still offer higher rates than the shorter term investment options.
For those investors in the 3.1 million fixed rate products due to mature over the remainder of 2013 - particularly those 2, 3 and 5 year bonds in July and November (see graph below) - HSBC recommends that people seriously consider what the best possible home for their savings is.
For more information visit:
HSBC Bank plc: HSBC serves 16.1 million customers in the UK and employs approximately 52,000 people. In the UK, HSBC offers a complete range of personal, premier and private banking services including bank accounts and mortgages. It also provides commercial banking for small to medium businesses and corporate and institutional banking services. HSBC Bank plc is a wholly owned subsidiary of HSBC Holdings plc.
The HSBC Group: HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 7,500 offices in over 80 countries and territories in Europe, the Asia-Pacific region, North and Latin America, and the Middle East and Africa. With assets of US$2,556bn at 31 December 2011, HSBC is one of the world's largest banking and financial services organisations.
Contacts:
HSBC
Suman Hughes
020 7992 2748
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Datum: 18.07.2013 - 07:00 Uhr
Sprache: Deutsch
News-ID 279512
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