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Tim Leonard

Tim Leonard

Finance Expert
Published: 26/03/2018
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The fixed savings market has seen some welcome improvement in recent months, with average fixed rates continuing to edge up to give savers better returns than they've had in years. This month is no exception, as not only have all averages comfortably recovered from the base rate cut in August 2016, but some are heading back towards levels we haven't seen in almost two years.

Rising rates

The data, taken from the latest Moneyfacts UK Savings Trends Treasury Report, shows that the average one-year fixed rate has risen by 0.01% to stand at 1.19%, the highest seen since June 2016 when it was last at this level. Meanwhile, the long-term equivalent has seen an even greater increase of 0.03%, now standing at 1.68%, reversing last month's fall and returning to the level recorded in January.

Things are arguably even more positive in the cash ISA market, as while the average one-year rate remained unchanged at 1.12%, it marks the ninth consecutive month of either rising or remaining static. Meanwhile, the long-term ISA rate rose by 0.02% to 1.48%, the highest seen since May 2016 (1.52%), as competition begins to return to this sector of the market.

This can be further seen in terms of the number of providers active in this market sector. There are now 88 providers offering cash ISAs, up two on a monthly basis and the highest number figure seen since June 2013, highlighting the renewed desire to compete for cash ISA savers.

This will be particularly welcome news to those wondering what to do with the remainder of their ISA allowance for the 2017/18 tax year, or those who want to get a head start on the next one. Finding the best cash ISA rate can ensure you maximise your £20,000 allowance, and opting for a fixed rate is still one of the best ways to get the highest return.

Yet it remains the case that, to find the best fixed savings rates, you still need to compare the options – and you also still need to think outside the box.

Challenger vs. high street

Take a look at the Best Buys and you'll see a distinct lack of entrants from the high street. This is simply because they still don't need savers' cash – largely thanks to Government initiatives to boost lending, which continue to have a knock-on effect on the savings market – but challengers do.

Indeed, the bulk of activity this month has come from these smaller banks, many of whom appear to be continuingly trying to out-do each other to get to the top of the charts. They typically pay far higher rates than their better-known counterparts, and considering they come with the same level of FSCS protection – or the European equivalent – there's no reason not to give them a go.

It's hoped that this kind of pattern will continue in the foreseeable future, too. More challenger banks are in the pipeline which means there's set to be even greater competition in the savings market, and savers themselves can benefit.

So why not get a head start? Fixed rates are already rising, and although you may be reluctant to tie up your money given speculation of another base rate rise, there's nothing to stop you opting for a shorter-term deal for guaranteed returns (it could be a great way to use up the rest of your 2017/18 ISA allowance, too). Check out the best savings rates using our Best Buys or savings search tool, and see if you can take advantage.


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