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Fixed savings rates see significant boost

Fixed savings rates see significant boost

Category: Savings

Updated: 19/07/2017
First Published: 19/07/2017

After yesterday's revelation of improvements in the savings market and last week's reveal of rising one-year bond rates, we've got more good news for savers – our latest figures show that ALL fixed savings rates have increased in the last month, the first time we've seen this pattern since April, which could give a welcome boost to cash returns.

On the up

As reported last week, the figures show that the average one-year fixed bond rate has risen by 0.07% this month, now standing at 1.07%, marking an 11-month high and the first time the rate has risen above 1.00% since last August. However, additional figures – as reported in the latest Moneyfacts UK Savings Trends Treasury Report – show that the average long-term rate also rose, this time by 0.05% to stand at 1.49%, another 11-month high.

This means both rates are now close to levels seen prior to the base rate cut last August, and marks the fifth consecutive month that both non-ISA fixed rates have risen.

In even more welcome news, the fixed ISA market also saw considerable increases, with the average one-year ISA rate rising by 0.04% to 0.95%, the highest figure seen since October 2016, while the long-term equivalent rose by 0.06% to 1.19%, the highest since last August. However, these rates are still some way below their pre-cut levels, with competition remaining far more muted in this sector of the market, largely as a result of the personal savings allowance.

It's worth pointing out that these are all only averages, too. For example, the best one-year bond currently available comes from Al Rayan Bank, with an expected profit rate of 2.02% AER, almost 1% higher than the average. Similarly, the top long-term bond (from BLME) pays 2.55% for a seven-year term, or 2.50% for five years, so it's worth comparing the options!

The ISA sector may be more subdued, but you can still find returns that are well above average. The best one-year cash ISA, for example, comes from Bank of Cyprus UK and pays 1.22%, while the top long-term equivalent (from Paragon Bank) pays 1.95%. This means cash ISAs should still be considered a part of your savings portfolio, particularly given recent improvements.

Mixed picture

Things aren't quite as positive in the variable sector, however. Here, the average non-ISA notice account rate has risen by 0.02% to 0.57%, an eight-month high, but the easy access equivalent remained unchanged at 0.38%. Similarly, the average notice ISA rate remained unchanged at 0.76%, but the no notice version fell by 0.01% to hit 0.61%, a new record low.

This highlights the fact that the fixed sector of the market is the key focus among providers, as can be further seen when looking at product numbers. As discussed earlier this week, the number of savings accounts available has hit an 18-month high, with 1,700 accounts currently on the market, the highest figure since January 2016 (1,719). In line with activity at rate level, the majority of new launches this month were in the fixed sector of the market – and within that, challenger banks and mutuals continue to dominate.

These smaller providers are keen to both attract new customers and retain current business, and for that reason they're almost obliged to offer competitive rates. They're the only savings providers competing to any extent, with the vast majority of rate increases being made by these lesser-known brands, which means it's time to get to know them!

Many of the best rates available come from smaller names – as seen above, brands like Al Rayan Bank and BLME often lead the way – and given that challenger banks come with the same financial protection as their mainstream counterparts, there's no reason not to give them a go. Start comparing the best savings rates and see if you can benefit from growing competition.

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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