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Consumers have faced a disappointing savings market throughout 2019, with fixed bond rates continuing to tumble and now at their lowest levels since 2017.

Data from Moneyfacts UK Savings Trends Treasury Report shows that fixed rates on longer fixed rate bonds (those with a term of 550 days or more) are at their lowest levels for more than two years. In fact, the average longer-term fixed bond rate, which currently stands at 1.54%, is at its lowest point since July 2017, when it was just 1.49%. In addition to this, the average longer-term fixed ISA rate, currently at 1.35%, is at its lowest point since October 2017, when it was 1.32%.

This year has also seen falls in one-year fixed rates on both bonds and ISAs, with the average one-year fixed bond rate currently at 1.28%, its lowest level since June 2018, when it stood at 1.28%, and the average one-year fixed ISA rate currently offering 1.21%, its lowest level since May 2018, when it was 1.19%.

Savings market analysis 

Rachel Springall, finance expert at Moneyfacts, said: “It will be disappointing news for savers to find the positive impact of both competition among challenger banks and two base rate rises over the past two years has unravelled in such a short space of time. Indeed, this year both the longer-term fixed bond and ISA average rates hit their highest peak since the 2017 base rate rise. In March 2019, the longer-term fixed bond rate hit 1.89%, and the average longer-term fixed ISA rate had reached 1.62%, meaning they have dropped by 0.35% and 0.27% respectively over the past eight months.

“The sentiment among providers may well be that they do not want to risk paying out an inflated rate to consumers if they feel interest rates are expected to fall over the next few years. On the opposite side, savers may not want to invest in a longer-term fixed bond or ISA, and are instead opting to keep their cash close to hand. Pensioners may also be using easy access accounts instead of fixed while they decide what to do with their pension freedoms cash.

“Consumers who are still searching for a competitive fixed rate over the next few years may not want to wait too long, even if it’s just to fix for a year. Over a third of fixed rate bond providers removed their products from sale or cut rates last month. The top one-year fixed bond has now fallen below 2% for the first time in 18 months and further cuts may well come before 2019 is over.”

Savers hoping to get the final 5% rate available on a regular savings account will be disappointed to see that this rate has been reduced today.

M&S Bank, which was offering that last 5% rate available on its regular savings account, has now cut the rate to 2.75%. This follows on from cuts made by HSBC and first direct on their regular savings accounts last month and is part of a general savings trend that has seen rates fall throughout 2019.

The latest analysis by Moneyfacts.co.uk reveals that savers, on average, would have earned 2.64% on a regular saving account in January 2019, based on a £1,000 investment, but that the average rate today has fallen substantially to 2.24%, a reduction of 0.40%. Now, the only way savers can earn 5% interest is to choose a high interest current account, with Nationwide Building Society offering 5% AER on its FlexDirect account.

Top interest paying regular savings account 

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Savings rates have been on a downward trend this year and this hasn’t escaped the attention of the regular savings account market, which isn’t usually very volatile. Providers are uncomfortable offering lucrative interest rates to savers, including guaranteed fixed interest rates applied on regular savings accounts.

“Those looking to save towards Christmas 2020, or simply to get into the savings habit for other goals, will feel disheartened, but this outcome seemed inevitable given the economic uncertainty. Thankfully, those savers who had already snapped up the M&S Bank 5% regular savings account will still get this rate, as it is fixed, but new customers will get a poorer deal at 2.75%, which can now be beaten elsewhere.

“If consumers are looking for a top rate to save for 12 months, then they will find Monmouthshire Building Society and Saffron Building Society paying 3% fixed, and Kent Reliance paying 3% variable – although the latter is only available in branch.

“Savers who want to open and manage their account online with no strings attached – such as opening a current account - will find Principality Building Society pays the top rate of 2.70%. Savers may want to act quickly though, as this deal is a Christmas Bond for 2020 and might not be around for very long.”

Mortgage borrowers will be pleased to see that the mortgage charts have remained highly competitive this week. In fact, there have been no rate rises for any of the top rates in the chart and a new low rate has taken the top spot in the five-year fixed moving home chart.

Saying this, it is important for mortgage borrowers to consider a range of factors when choosing the right mortgage deal and not just consider the lowest rate on offer. This is because sometimes better deals can be found on slightly higher rates when factoring in incentives and flexibility features.

Savers looking to open a notice account will be pleased to see that a new rate is now topping the notice account chart, however those looking for a short-term bond will be disappointed to see that Al Rayan Bank has dropped its chart-topping rates during the week. Saying this, competitive savings rates continue to be available across the charts and, with the news that inflation fell to 1.5% during October, more accounts are offering savers inflation-beating rates.