Savings rates have been showing signs of improvement recently, with one-year fixed bond rates storming ahead and even cash ISA rates rising, as fixed ISA rates reach their highest level since last summer. Happily, we've got even more good news for you today, with our latest figures showing that the long-term bond rate has hit a 14-month high.
That's right – the average rate for a five-year fixed bond has hit 1.96%, an increase of 0.02% in just seven days, making it the highest we've recorded since August 2016 (when it stood at 1.97%). This marks a serious improvement in recent months and is a definite turnaround from its low point of 1.66% recorded in January, with the rate having plummeted in the latter half of last year following the cut to base rate in August.
It could well be speculation of an upcoming rise to base rate that's fuelling the latest increase in savings rates, with such speculation heightening this week following the news that inflation is at a five-year high. However, it could also be something much simpler, with competition likely to be leading the fixed rate charge.
Competition remains intense among challenger banks and mutuals, all of whom are eager to get to the top of our Best Buy charts. They still need our money, unlike high street banks, and are prepared to offer great rates in order to get it.
Indeed, just this week we've seen Vanquis Bank increase its fixed bond rates, resulting in its two, three and five-year bonds taking comfortable positions in the charts, while Axis Bank has done the same with both its one-year bond and two-year equivalent, which earns these a coveted place in the Best Buys too.
Several brands have also upped their rates and launched new products in the long-term sector over the last month, including Charter Savings Bank, Virgin Money and Kent Reliance, so there's a lot going on for savers wanting to make the most of their money.
This means that now could be a great time to benefit from that competition and snap up a top deal, particularly if you're seeking a guaranteed return over the long term. The only drawback could be uncertainty surrounding base rate, and the impact it'll have on savings rates – there's the chance that if base rate rises, savings rates could follow, which means anyone in a long-term bond could be locked in for the foreseeable future, unable to take advantage of higher rates.
However, there's no guarantee; rate activity is still likely to be driven by competition in the months ahead, regardless of what happens to base rate, and while we're hopeful, we just don't know if rates will rise by any extent. That's why some may still want to lock at least a portion of their savings away for a few years, ensuring some guaranteed returns when they come back to it.
Compare the best fixed rate bonds, or if you still want to keep your cash accessible, check out the best easy access and notice accounts as well. Don't overlook cash ISAs, either, particularly now that rates are rising, as they could be a great way to ensure your tax-efficiency for the long term.
However, what if you want an inflation-beating return? Fixed bond rates may be rising, but they're still not high enough to help you beat or even match inflation at 3%, which means it's time to think outside the box. Take a look at the best inflation-beating accounts to secure a meaningful return from your savings.
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.