nigel woollsey

Nigel Woollsey

Online Writer
Published: 19/11/2019

Short-term fixed rate bonds can be an attractive proposition for anyone looking to earn more interest than an easy access account without locking their money away for too long. Currently, there are three Islamic banks all offering the top expected profit rate of 1.85% for a one-year fixed rate bond. However, as you can see from our table below, there is a difference of just 0.15% between the top of the chart and the bottom, meaning that you are not losing much interest if you like the terms of an account further down the table. In addition, if you have more than £85,000 to save, you can do so in different institutions and remain protected.

 

Seven best one-year fixed rate bonds in November

Provider

Account

Term

Rate AER

Bank of London and The Middle East

Premier Deposit Account

One year

1.90% (expected profit rate)

Gatehouse Bank

Fixed Term Deposit

One year

1.85% (expected profit rate)

Gatehouse Raisin

1 Year Fixed Term Deposit

One year

1.85% (expected profit rate)

Metro Bank

Fixed Term Savings Account

One year

1.80%

Ikano Bank

Fixed 1 Year Saver

One year

1.76%

United Trust Bank

UTB 1 Year Bond

One year

1.76%

Axis Raisin

Fixed Deposit Account

One year

1.75%

 

Leading the pack is the Premier Deposit Account from the Bank of London and The Middle East (BLME). For a one-year fixed rate term this pays an expected profit rate of 1.90% on a minimum deposit of £1,000, that is paid on maturity. This account must be opened online and then managed by post, but applicants must have or be prepared to open a BLME transfer account to hold funds pending investment. This bank operates under Islamic finance principles.

Gatehouse Bank are offering an expected profit rate of 1.85% for their online-only Fixed Term Deposit account with a minimum deposit of £1,000. The expected profit rate is paid on the anniversary of account opening and this bank operates under Islamic finance principles.

Completing the top three is Gatehouse Bank - Raisin UK, with their 1 Year Fixed Term Deposit that pays an expected profit rate of 1.85%. Expected profit is paid on maturity and there is a minimum deposit of £1,000. This account can only be opened online but can then be managed by post or by phone too. It should be noted that in addition to this bank operating under Islamic finance principles, applicants will need to set up a Raisin UK account online and accept their terms and conditions before applying for this fixed term deposit. Raisin are currently offering a bonus of up to £100 for opening a savings account via their website.

Metro Bank are offering their Fixed Term Savings Account paying interest of either 1.80% on the anniversary of opening or 1.79% monthly. This account has a minimum deposit of just £500, putting it within reach of many savers. Savers wanting to open this account will need to already have another Metro Bank account or to open an Instant Access account for transactional purposes. This fixed term account can be opened online or in branch and then managed by phone once set up.

Ikano Bank’s Fixed 1 Year Saver pays 1.76% on the anniversary of opening or 1.75% if you choose monthly interest. Requiring a minimum deposit of £1,000, this account can be opened online and then managed online and by phone too. Unusually, this account also has the bonus option of allowing further additions within 14 days of application from a nominated account. Savers should note that this bank operates in the UK under a European Economic Area (EEA) passport scheme. Savings placed with Ikano will be protected by the depositor protection scheme in Sweden and not the UK scheme. In Sweden, the first £85,000 per person, per banking licence, is protected. Deposits held by companies, partnerships and charities are also covered.

Find out more about the depositor protection scheme.

Savers will need a minimum deposit of £5,000 to open a UTB 1 Year Bond from United Trust Bank. This account pays 1.76% on maturity. Opening is online but management after this is done via post or phone.

Finally, Axis Bank UK Ltd offers their Fixed Deposit Account at a rate of 1.75% fixed for twelve months. The minimum deposit is £1,000 and the account can be opened online or in branch. After this, the account can be managed in branch or by post. Interest can be paid either on maturity or quarterly, with a monthly option paying slightly less at 1.74%.

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 

  Nov 2017 Aug 2018 Mar 2019 Nov 2019
Average one-year fixed rate bond 1.14% 1.32% 1.47% 1.28%
Average longer-term fixed rate bond 1.65% 1.82% 1.89% 1.54%
Average one-year fixed rate ISA 1.08% 1.23% 1.37% 1.21%
Average longer-term fixed rate ISA 1.40% 1.57% 1.62% 1.35%

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 

Provider, rate and term Operation method Minimum
Regular
Deposit
Maximum
Regular
Deposit
Notes
Kent Reliance - 3.00% - 1 Year Branch £1 £500 Variable rate paid on maturity. Minimum £25 initial deposit.
Monmouthshire Building Society - 3.00% - 1 Year Branch, Postal, Internet £0 £300 Fixed rate paid on maturity. Restricted to those living in England and Wales. Minimum £20 initial deposit.
Saffron Building Society - 3.00% - 12 Months Branch, Postal £10 £250 Fixed rate paid on maturity. Postal opening available to existing customers only.
M&S Bank - 2.75% - 12 Months Branch, Telephone, Internet £25 £250 Fixed rate paid on maturity. Available to current account customers who have switched using the Current Account Switch Service and have two active Direct Debits.
first direct - 2.75% - 12 Months Telephone £25 £300 Fixed rate paid on maturity. Must hold a first direct 1st Account.
HSBC - 2.75% - 12 Months Telephone £25 £250 Fixed rate paid on maturity. Available to specific current account customers.
Principality Building Society - 2.70% - 1 Year Branch, Postal, Internet £0 £125 Fixed rate paid on maturity.  Minimum £10 initial deposit.
Chorley Building Society - 2.50% - matures 30.6.20 Branch, Postal £0 £250 Variable rate paid on maturity. Available to existing members (must have held open product for 12 months prior to opening.) and/or new money to the institution
Coventry Building Society - 2.50% - 12 Months Telephone, Internet £0 £500 Variable rate payable on its anniversary. New money to the institution.

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.

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nigel woollsey
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