A combination of rising inflation and low saving rates has created a challenging year for savers, but rates are starting to improve with new research showing that average fixed bond and ISA rates have reached their highest point this year.
The research, which is set to be published in the Moneyfacts UK Savings Trends Treasury Report, shows that average fixed bond rates have improved year-on-year with the average one year fixed bond rate now standing at 0.67%, up from 0.65% available a year ago. Meanwhile, the average rate on longer-term fixed rate bonds is now 0.94%, an increase from 0.86% during September 2020.
Savers looking for an ISA will find that although the average one year fixed ISA rate has fallen year-on-year, down from 0.58% in September 2020 to 0.49% this month, it is still at its highest point this year and has increased month-on-month, rising from 0.45% in August. Those looking for a longer-term fixed rate ISA will find that the average rate currently stands at 0.79%, up from 0.78% available a year ago.
Although fixed bond and ISA rates have seen improvements, savers looking for an easy access account that will enable them to access their savings will be disappointed to see average rates within the easy access savings chart have fallen month-on-month, down from 0.18% in August to 0.17% this month. Savers considering an easy access ISA instead will find that the average rate is higher, standing at 0.24% and has seen no change month-on-month.
“Savers who feel uneasy in locking their money away for a year or more may find notice accounts as an alternative between fixed and easy access accounts, especially as notice rates are on the rise,” explained Rachel Springall, finance expert at Moneyfacts.co.uk. “Month-on-month the average notice rate rose for the fifth month running to 0.47% and is at its highest all year. There are many challenger banks within this arena, as there are in the fixed bond market, but where activity is lacking is within the ISA market, which could do with a healthy injection of competition. However, in a low-interest-rate environment and with savers utilising the Personal Savings Allowance, it's understandable if some savers overlook ISAs altogether.”
Although not all average rates across the savings charts have seen improvements month-on-month, competition overall has improved with 1,573 savings deals currently available - the highest number of deals available since April 2020 when there were 1,588 deals.
Savers looking to get the best rates will likely have to opt for challenger bank, many of which are offering leading rates within the savings charts. As well as this, savers will need to act quickly to secure the top rate as banks and building societies offering chart-topping rates are often finding that their accounts are quickly reaching maximum investment and are having to reduce rates or withdraw the deal altogether as a result. In fact, the average self-life of a fixed rate bond is currently just 33 days. Springall added: “As interest rates continue to change, savers and providers alike will need to act with pace to keep on top of rate adjustments and demand.”
Eligible deposits with UK institutions are protected by the Financial Services Compensation Scheme (FSCS) up to a maximum level of protection of £85,000 per person per institution. All new savings or bank accounts provided to UK customers are now covered by the FSCS.
Quick links are where we have an arrangement with a provider so you can move directly from our site to theirs to view more information and apply for a product. We also use quick links where we have an arrangement with a preferred broker to move you directly to their site. Depending on the arrangement we may receive a modest commission either when you press a 'Go to Provider' or 'Speak to a Broker' button, when you call an advertised number or when you complete an application.Disclaimer
All rates subject to change without notice. Please check all rates and terms before investing or borrowing.
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. Moneyfacts.co.uk 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.