Savers, we've got some great news, because average fixed rates have risen for a further month! This is the fourth consecutive month that the majority of fixed savings rates have edged up, fuelled by growing competition in this sector of the market, and a lot of it seems to be the result of the upcoming changes to the Financial Services Compensation Scheme (FSCS)…
Our figures show that fixed rate increases were seen across the board – only the third time since September last year that all fixed rates have risen – and the long-term sector reported the strongest increases. The long-term fixed cash ISA rate rose by 0.04% to 1.99% while the non-ISA equivalent registered an increase of 0.06%, now standing at 2.10%, with both now being at their highest levels in over a year.
The one-year sector also saw increases, albeit to a lesser extent than its long-term counterpart, with both the one-year ISA and non-ISA rates up by 0.01% to stand at 1.48% and 1.47% respectively. All rates remain among the lowest recorded, but even so, the increases are notable, particularly at a time when external market factors (low inflation, static base rate and falling SWAP rates) suggest that the opposite should perhaps be happening.
This means that another factor must be influencing the fixed sector of the market, and analysis suggests that the forthcoming reduction to the FSCS limit could be it.
After 31 December, the level of deposit protection will reduce from £85,000 to £75,000, which means that you'll only receive compensation of up to £75,000 per financial institution should the bank go bust.
This means that those who hold more than that amount with a single provider may want to move the extra funds elsewhere, and they're being actively encouraged to do so – the Bank of England is permitting those with fixed rate accounts to withdraw funds between the old and new limits without penalty, so there could be a lot of people with £10,000 to re-invest in a new account.
This, in a nutshell, is why the FSCS cut is having such an impact: providers want to compete for this extra business so they're increasing fixed savings rates accordingly, and many are enhancing their product range, too (there's been a clear increase in product numbers, with the number available now standing at 1,729, up 24 from last month), and happily, savers are benefiting.
Given that the cut doesn't come into force until the start of 2016, there's a possibility that the boost to fixed rates could continue, but why wait? With such great deals already available, now could be a great time to consider your options, whether you need to move your savings around or want to start a new pot. Check out our savings best buys to get started.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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