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Fixed bond rates surge to 18-month high

Fixed bond rates surge to 18-month high

Category: Savings

Updated: 15/11/2017
First Published: 15/11/2017

The fixed rate bond sector has seen some welcome competition in recent weeks, so much so that average rates have stormed ahead, with our figures revealing that both the two and three-year bond rates have surged to an 18-month high!

Rates on the rise

The figures show that the average two-year fixed bond rate now stands at 1.45%, up from 1.44% a week ago and the highest seen since May 2016 (1.46%). Similarly, the average three-year bond rate has risen by 0.02% in the last week to stand at 1.66%, also the highest rate seen since May last year, when it hit 1.68%.

Rates had been on a downward spiral for years at that point and took a particularly sharp downturn last August, when base rate was cut to 0.25%, before the two-year rate hit a record low of 1.03% in December of that year and the three-year rate followed suit this January (1.21%). Happily, rates have been slowly recovering since then and this latest uptick is particularly welcome, with the fixed bond sector seeing a lot of competition.

Indeed, other fixed bond rates have seen similar improvement, with the average five-year rate having now risen to a 16-month high of 2.00%, up from 1.99% a week ago and hitting this key milestone for the first time since July 2016! Meanwhile, the four-year bond rate has remained comfortably stable at 1.85% for three consecutive weeks and the one-year rate has been at 1.16% for the last two, with our data showing that several providers have upped their rates in recent weeks.

This includes OakNorth Bank, which has increased rates on its short-term bonds by up to 0.16% in the last seven days to comfortably hit the Best Buys; United Trust Bank, which raised its two-year bond rate by 0.05%; and Vanquis Bank, which has increased the rate on its four and five-year deals to secure a Best Buy position, with all of these improvements having a notable impact on the market.

Mixed picture for easy access

Things aren't quite as positive in the easy access sector, as despite the recent base rate rise, the average no notice rate has actually fallen since the end of last month, and now stands at 0.39%. This has been driven by several providers withdrawing their Best Buy accounts and others actually cutting rates prior to the base rate announcement, with our latest figures showing that just 18 providers pay 1% or more on their easy access savings account.

But it isn't all bad news in this sector of the market – some providers are still looking to compete, particularly smaller challenger banks, resulting in the best easy access rate available rising to its highest level since last summer.

This is the result of Bank of Cyprus UK increasing the rate on its bonus account, which now pays a market-leading 1.35% from a minimum investment of just £1. The rate includes a 0.50% bonus for 12 months which means the account will need to be reviewed after a year, but in the meantime, this is a rate that can't be beaten by anything else if you want to keep your cash accessible (unless you look to high interest current accounts, but that's another story).

Find the best deals

So why not make the most of the market? You'll no doubt notice that most of the best savings rates available come from lesser-known brands, but given that these have the same level of financial protection as high street names, they could certainly be worth considering. Take a look at our Best Buys or use our savings search tool to get started, and see if you can benefit from the recent competition to snap up a great deal.

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.

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