One-year fixed savings rate storms ahead - Savings - News | moneyfacts.co.uk

News

Moneyfacts.co.uk News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

One-year fixed savings rate storms ahead

One-year fixed savings rate storms ahead

Category: Savings

Updated: 10/10/2017
First Published: 10/10/2017

The rate paid on one-year fixed bonds has made some impressive progress in the last six months, as a result of which it's now surpassed the two-year fixed average of six months ago. Indeed, while the average one-year bond paid less than 1% six months ago, and the two-year rate stood at 1.13%, new figures show that the one-year rate now pays 1.14% – great news for those looking to secure their savings over the short-term!

Competition surges ahead

"This welcome surge in the market has largely been fuelled by the challenger banks," explained Rachel Springall, finance expert at moneyfacts.co.uk, "with Charter Savings Bank, Milestone Savings and Vanquis Bank all having increased rates within the past month."

The competition between these providers in the last six months means an end to the stagnant rates of the previous six-month period, as can be seen in the table below. And luckily, "the sentiment of rising interest rates on these bonds doesn't appear to be wavering, as providers strive to leap-frog their competition to gain the spotlight at the top of the Best Buys."

Oct-16 Apr-17 Jul-17 Oct-17
Average One-Year Fixed Bond 0.99% 0.98% 1.09% 1.14%
Average Two-Year Fixed Bond 1.13% 1.13% 1.29% 1.41%
Source: Moneyfacts.co.uk


Getting the best out of the Best Buys

Indeed, the Best Buys have seen an even bigger improvement, as the average return on the top six deals has increased by 0.40% from April (based on a £10,000 investment) to stand at 1.82% today.

At the same time, the deals that sit at the very top of the charts have improved considerably, as "BLME now pays 2% over one year for investors with £25,000 to deposit, while Al Rayan Bank offers 1.90% gross [with both showing the expected profit rate], closely followed by Kent Reliance at 1.85% based on a £10,000 investment," said Rachel. "In comparison, the top deal in April was 1.51% from Paragon Bank, and savers would have had to lock into at least a four-year bond to earn 2%."

Considering the top two-year deal in April offered 1.80% (from Principality Building Society), it's easy to see how the one-year market has improved to leap past those former rates. At the same time, however, the top two-year fixed rate now stands at 2.22%, offered by Al Rayan Bank, so you may be asking yourself which is truly the better deal.

Fixing rates

Well, though two-year bonds may offer higher rates, and you can get even better rates if you fix for longer than that, Rachel pointed out that "with the ongoing murmurings of an upcoming base rate rise, savers will much likely favour a one-year bond over a five-year deal."

So, it's up to you to decide whether you want to fix your rate now for the long-term, or whether you'd rather take out a one-year bond and see if rates have improved even more in a year's time. Whatever you decide, over 100 rate rises in the one-year bond market alone means you should keep a close eye on those Best Buys, as the top deal could change at any minute!

What next?

Depending on your preference, have a look at the one-year Best Buy chart (which includes 18-month bonds as well), the two-year deals, or the four year and over chart.

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.

 
 
Close