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Published: 31/01/2017

It could be assumed that the start of this year hasn't brought much good news for savers, with rates still down compared to years gone by. Yet surprisingly, our latest research can reveal that challenger banks are breaking the savings rate cutting trend by improving many of their best deals, particularly in the fixed rate sector.

While the rises have been small, it has still meant some banks have jumped positions in the savings Best Buys since the start of the year. These higher chart positions are giving newer brands the chance to spotlight their offerings and attract new business, and they're giving savers a far better deal, too.

The table below highlights the five-year fixed rate chart, which has seen some of the most notable improvements so far this year:

The top 10 best deals for five-year fixed bonds in december 2016 Gross
The top 10 best deals for five-year fixed bonds in January 2017 Gross
Ikano Bank 2.05% Bank of London and The Middle East2.10%
Masthaven Bank 2.01% Atom Bank 2.05%
Milestone Savings 2.00% Ikano Bank 2.05%
Bank of London and the Middle East 2.00% Vanquis Bank 2.02%
Hampshire Trust Bank 1.95% Skipton BS 2.00%
Vanquis Bank 1.95% Aldermore 2.00%
Paragon Bank 1.95% Milestone Savings 2.00%
Close Brother Savings 1.95% Masthaven Bank 1.96%
Tesco Bank 1.87% OakNorth Bank 1.96%
Shawbrook Bank 1.85% Charter Savings Bank 1.95%
Source: Compiled 31/01/2017

As a result of these and many other changes, it looks as though a reversal of fortune could be on the cards. Indeed, Moneyfacts started tracking the number of savings rate cuts back in July 2015, and this has been the first month since September 2015 where there were more rises logged than cuts. Clearly there's still room for improvement, but it's certainly a good place to start!

"Savers have had little to hope for in recent years, but to everyone's amazement we have actually seen rate rises overtake cuts (67 rises to 53 cuts) in January," said Rachel Springall, finance expert at Moneyfacts. "This is, however, mainly thanks to the challenger banks bringing some much-needed competition back into the market.

"There has been a particular spike in competition for five-year fixed rates. Where a month ago the top 10 deals paid an average of 1.96%, today this has hit 2.01% thanks to new rates on offer from various challengers, including Atom Bank, OakNorth Bank and Vanquis Bank to name a few. This could be a sign that these new institutions are looking to hold cash for the longer term – which is positive news for savers looking for higher fixed returns."

However, if you're looking for a better known name, you may be disappointed, as the big banks have continued the rate cutting trend. They simply don't need to attract savers' cash to fund their lending, thanks in a large part to the Funding for Lending Scheme and its more recent addition, the Term Funding Scheme. This, coupled with a low bank base rate, means rates from these brands are likely to stay flat or get worse for the foreseeable future – so why not consider alternatives?

"It would be a struggle to find a big high street bank promoting a top interest rate on their savings range right now, so savers might be better off turning to challenger banks for their salvation," said Rachel. "However, these new banks cannot hold up the savings market on their own forever, so it would be great if we could see more improvement to the market overall, with more brands hopefully emerging.

"As with any deal, customers would be wise to choose quickly, as top rates could easily be withdrawn from sale after a provider gets inundated by savers looking for the best possible returns."

So act fast! Now could be a great time to squirrel away your money in a longer-term deal, because there's just no telling how long these rates will be around for. Compare the top fixed rate bonds to get started, or if you'd rather have more flexibility when it comes to your savings, you may want to look at easy access deals, too (there's even been competition in this market of late, so it could be worth taking a look!).


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. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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