Savers looking to boost their savings pots will no doubt seek accounts that pay the highest rates of interest, which would have traditionally led them to long-term fixed rate savings bonds. However, times are changing, and savers may be disappointed by the deals on offer, with our latest figures showing that average rates in this sector have hit new lows thanks to an onslaught of rate cuts.
Indeed, our latest figures show that the average five-year fixed rate account now pays a miserly 2.28%, down from 2.50% a year ago and 2.56% in 2014. A similar downward trend can be found among five-year fixed ISAs: the average rate in this sector is now a disappointing 1.98%, down from 2.20% this time last year and a sharp drop from the average of 2.59% recorded two years ago.
The table below shows just how far rates have fallen, with even the best rates available being paltry in comparison to recent years:
So, thanks to providers cutting rates left, right and centre, every long-term fixed Best Buy deal now offers a return of less than 3.00%, which shows just how important it is for savers to act fast if they want to secure a good deal.
"Long-term fixed savings rates have officially fallen from grace as a consequence of low interest rates and a lack of appetite among providers for savers' cash," said Rachel Springall, finance expert at Moneyfacts. "Providers that offer long-term bonds typically do so to fund longer-term lending, but thanks to Government borrowing initiatives, their desire to attract savers has dissipated."
As a result, savings rates are continuing to plummet, which means that consumers are facing increasingly limited choice when it comes to finding an account that pays a decent return. Indeed, our data shows that rate cuts of up to 0.44% were applied to five-year fixed bonds last month, which means that only seven deals now pay 2.50% or more for new customers – a sharp drop from the 18 deals that offered equivalent rates a year ago.
"To put this change into even greater context, savers could get an easy access account that paid an average of 3.75% before the credit crash [this average was recorded in May 2008], but now not even a seven-year bond pays this kind of return," added Rachel.
However, that's not to say that all is lost, and there are several other options to consider if you're looking to grow your savings pots: a regular saving account, for example, could be an attractive short-term alternative, while interest-paying current accounts offer the ideal combination of great rates and easy access to cash. So, if you're stuck with a poor-paying account, why not revisit things and plan a new course of action?
Rachel concludes: "Savers are undeniably in a difficult position thanks to rates being so low, especially those who rely on monthly interest to supplement their income. They must therefore try to grab any attractive deals before they become oversubscribed in order to secure the best returns possible."
Don't put up with poor savings rates – compare alternatives and see if you can find a better deal
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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