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One-year fixed bond market sees welcome shake-up

One-year fixed bond market sees welcome shake-up

Category: Savings
Author: Lieke Braadbaart
Date: 24/10/2018

Savings security still requires a commitment, as fixed rates tend to only be offered to those who are happy to say goodbye to their funds for at least a year. However, there may now be plenty of reason to take this plunge, as the average one-year fixed bond rate has reached a height not seen since January 2016.

The average rate of 1.47% is the same return seen at the start of 2016 and a nice increase from the low of 0.99% recorded in October 2016. This means that if you're reluctant to part with your cash for too long, you might find that a one-year fixed rate bond fits the bill both rate- and term-wise.

Oct-16 Oct-17 Jan-18 Today
Average one-year fixed bond rate 0.99% 1.15% 1.17% 1.47%
Source: Moneyfacts.co.uk

"Savers may be contemplating how they can secure a decent return on their nest egg next year, particularity if they are concerned about economic uncertainties," commented Rachel Springall, finance expert at Moneyfacts.co.uk. "Thankfully, providers have been eyeing up the one-year fixed bond market this month, giving savers better rates to choose from."

Much of the welcome increase this month is thanks to 12 providers increasing their one-year rates by up to 0.51%. As a result, the best rate available today pays 0.20% more than the top rate a year ago, which was an expected profit rate of 1.85% on offer from Al Rayan Bank. Today's top one-year bond rate also comes from a Sharia'a compliant account, with this time the Bank of London and The Middle East paying the market-leading expected profit rate of 2.05% to those who can deposit £10,000.

Best Buy one-year fixed rate bonds Account Gross rate at £10,000
Bank of London and The Middle East* Premier Deposit Account 2.05%
Shawbrook Bank 1 Year Fixed Rate Bond Issue 53 2.03%
OakNorth Fixed Term Deposit 2.02%
Union Bank of India (UK) Ltd Fixed Rate Deposit 2.02%
Union Bank of India (UK) Ltd Union Premier Bond 2.02%
Zenith Bank (UK) Ltd 1 Year Fixed Term Deposit 2.02%
Al Rayan Bank* Fixed Term Deposit 2.00%
Atom Bank 1 Year Fixed Saver 2.00%
Ford Money Fixed Saver 1 Year 2.00%
Ikano Bank Fixed 1 Year Saver 2.00%
Source: Moneyfacts.co.uk
*Note: These banks operate under Islamic finance principles, so the rate displayed represents the expected profit rate. The highest fixed bond rates mentioned are for new customers.

As you can see from the table above, "challenger banks have continued to stir up the Best Buys," with Rachel explaining that "last week Shawbrook Bank raised its one-year fixed bond rate to 2.03%, securing a place in our Moneyfacts.co.uk Best Buys … [Additionally,] Zenith Bank and Ikano Bank upped their rates to 2.02% and 2.00% respectively this month, while Tesco Bank increased its one-year fixed bond by a huge 0.51%."

In contrast to today's top 10, not a single bond on the market paid 2% over one year 12 months ago. "While some of these rate rises may well have been on the cards for a few weeks, it is actually a great time to shake up the market as we edge ever closer to the end of the year," Rachel said. "Some savers may be coming to the end of their fixed deal and want to reinvest, but feel uncomfortable tying their money down over the longer term.

"As many of the new offerings are from less familiar brands, savers will need to keep on top of the latest Best Buys so they don't miss out on the improved returns generated from this latest competition, particularly if they fail to get online."

What next?

The Moneyfacts.co.uk fixed bond charts are a great place to start for anyone looking to secure a return; the short-term chart includes terms that range from one year to 18 months for handy comparison.

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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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