One Year Bond Rates Fall To A Record Low | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 16/11/2020

The average rate on a one year fixed bond has fallen to a record low of 0.61%, which was a sudden drop after two consecutive months of rate rises.

Data from the soon-to-be-published Moneyfacts UK Savings Trends Treasury Report has found that the average one year fixed bond rate increased from 0.63% in August to 0.65% in September and then increased again to 0.68% in October. This month, however, the average rate fell to a new historic low of 0.61%.

Currently, the top rate being offered on a one year fixed bond is an expected profit rate of 1.08% on Al Rayan Bank’s Fixed Term Deposit. This is 0.22% lower than the top one year bond rate that has been available in the chart since August, as during September, My Community Bank and Paragon Bank offered the top rate of 1.30%.

“One of the most ignited areas in the savings market was one year fixed rate bonds, which saw average rates rise for two consecutive months after the record low seen in August,” explained Rachel Springall, finance expert at Moneyfacts.co.uk. “However, the average return has since fallen to a new low of 0.61%, fuelled by numerous top deals experiencing cuts, such as those from challenger banks. Thankfully, these brands continue to have a prominent presence in this area of the market, and the cuts are perhaps more linked to their attempts to cope with demand and realigning their position than deterring prospective investors completely.”

Month-on-month average rates fall

In addition to average one year bond rates falling, the average rates on longer-term bonds (accounts with fixed terms lasting longer than 550 days) and notice accounts have also seen month-on-month falls. In October, the average longer-term fixed bond rate was 0.93%, but has since fallen to 0.87% for November, a fall of 0.06%. The average notice account rate fell by 0.03% during this same period, from 0.53% to 0.50%.

In the non-ISA charts, easy access savings accounts saw the smallest fall month-on-month of just 0.01%, falling from 0.23% in October to 0.22% in November. “One area of the market to see little change last month was the easy access arena, but we could see some deals adjusted in light of the rate cuts soon to come from National Savings & Investments (NS&I) this month,” added Springall. “However, there is no certainty that an attractive rate will remain on the table for long and we have already seen this over the past couple of months since NS&I announced cuts were to come. Consumers continued to put cash into easy access accounts rather than fixed, with the latest Bank of England statistics showing that the inflow into interest-bearing sight deposits hit £6.5bn during September, a substantial rise from £2.4bn in August.”

With the savings market currently highly volatile, savers are urged to keep constant track of savings rates to secure the best deals. Springall explained: “Market volatility may now force the hand of savers to review rates on a more frequent basis, rather than a month-by-month check, as rates are changing much more frequently. This may also pose a challenge for savings providers who are attempting to retain a competitive offering, but perhaps are inundated by demand for the top rates and must then change their deal fast. Therefore, keeping on top of the trends in the market will be essential at such a crucial time for providers and savers alike.”

One way savers can easily keep track of the top savings rates is using our savings round up, which is published every Friday.

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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