Competition within the fixed rate bond market has significantly weakened as the number of providers that have withdrawn products or cut rates has increased to 44% during August, data from Moneyfacts UK Savings Trends Treasury Report reveals.
In fact, the number of providers that have cut rates or withdrawn products within the fixed rate bond market has increased by 21% in just two months. According to data from the report, in June 23% of providers cut rates or withdrew products, this grew to 40% in July and to 44% in August.
Rates were cut and products withdrawn across the fixed rate bond sector, with both long term and one year fixed rate bonds impacted. In June 2019, the proportion of providers that cut or withdrew deals was 21% on long term bonds and 12% on one year fixed rate bonds. This has leapt to 40% on long term bonds and 30% on one year fixed rate bonds in August.
As a result, average rates for both long term and one year fixed rate bonds have fallen, with the average long term fixed bond rate (1.64%) falling to its lowest point since October 2017 (when it stood at 1.62%) and the average one-year fixed bond rate (1.34%) at its lowest level since August 2018 (when it stood at 1.32%).
Savings market analysis
|Sep 2018||Mar 2019||Aug 2019||Sep 2019|
|Average one-year fixed rate bond||1.40%||1.47%||1.37%||1.34%|
|Average longer-term fixed rate bond||1.86%||1.89%||1.72%||1.64%|
*Longer-term fixed bonds are those with terms over 550 days.
Challenger banks continue to dominate the fixed rate bond charts offering the top rates for all terms. This means that savers wanting to get the best available fixed bond rates will have to move away from the more familiar high street banks and building societies and instead opt for a provider that they may be unfamiliar with. In addition to this, all the current top rates are only available on accounts that can only be opened online, which means savers wanting to bank face-to-face will have to forego the most competitive rates to do so.
The overall best rate available in the fixed rate bond chart is currently an expected profit rate of 2.45% on Gatehouse Bank’s Fixed Term Deposit. This five-year bond requires a minimum opening deposit of £1,000. Bank of London and The Middle East (BLME) currently offers the top rate in the three year fixed rate bond chart with its Premier Deposit Account paying an expected profit rate of 2.45% on a £1,000 deposit. The one-year version of BLME’s Premier Deposit Account also tops the one year fixed rate bond chart paying an expected profit rate of 2.10%.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “It’s a worrying trend for savers to see, but it’s clear as day that fixed rates are tumbling. The proportion of savings providers to cut or withdraw their fixed rates has grown twofold since June, now seen as a period of summertime sadness for the savings market.
“Savers who waited until September to grab a fixed rate bond will be disappointed to have missed their opportunity to get the highest returns, particularly on longer term fixed bonds, where the average rate has dropped to its lowest point since October 2017. If savers do now decide to invest, speed is of the essence because of the rate cut domino effect that is rippling through the top rate tables.
“Savings providers that sit in the top rate tables price their fixed rate bonds to gain attention, but if they feel they are getting inundated with deposits too quickly, they could not only cut their rate to ward off the hoard but withdraw the offer entirely, which we have seen occurring recently.
“Our data shows that even the challenger banks are playing their part with these cuts and withdrawals, however they remain within the top rate tables. This then demonstrates how the challengers are perhaps determined to remain in the mindset of savers by appearing highly in the market, but the brands may not wish to lead that very same market and fill their subscription levels too quickly.
“As it stands, rates may continue on the downward trend, but with economic uncertainties and concerns of the everyday saver, savings providers will need to keep a close eye on the market and react quickly to the relentless movements of their market position.”
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.