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Derin Clark

Derin Clark

Online Reporter
Published: 15/10/2019

Savers are being hit by falling fixed savings rates as 39% of fixed rate bonds providers cut rates or withdrew products from the market during September, compared to just 12% of providers that launched or increased rates during the month, the latest research by shows.

The research reveals that this has led to a significant drop in the returns available across all fixed rate bonds. For example, the average longer-term fixed bond rate (1.59%) fell to its lowest point since August 2017, when it stood at 1.57%. While the average one-year fixed bond rate (1.29%) is at its lowest level since June 2018, when it stood at 1.28%.

Saying this, there is some good news for savers as the proportion of fixed rate bond providers overall that removed their products from sale or cut rates stands at 39%, down slightly from 44% in August and 40% in July.

Savings market analysis 

  Oct 2018 Aug 2019 Sept 2019 Oct 2019
Average one-year fixed rate bond 1.42% 1.37% 1.34% 1.29%
Average longer-term fixed rate bond* 1.85% 1.72% 1.64% 1.59%

*Longer-term fixed bonds are those with terms over 550 days. 

Rachel Springall, finance expert at Moneyfacts, said: “Savers will need to be quick off the mark to secure a competitive fixed rate bond as interest rates are tumbling. In fact, there were more fixed rate bond providers that cut or withdrew their deals during September than improved or launched.

“Indeed, there appears to be a race downwards in the top rate tables, as fixed rate providers find themselves in a prominent position that may not be sustainable. Already this month, Wesleyan Bank launched a lucrative 18-month bond that paid 2%, but was on the shelf for just one day.

“This doesn’t necessarily mean that challenger banks are leaving this market though, as it is clear to see from the top rate tables that many hold the highest positions and very few withdrew their range compared to making cuts in September. However, what is noticeable is that longer-term fixed bond returns are falling fast.

“During a period of economic uncertainty, it could well be the case that savers are more inclined to invest for a shorter term, or indeed into a pot that is instantly more accessible. Therefore, if and when the fixed savings market improves, it could be more common to see providers compete in the one-year fixed bond market.

“In fact, with a rate discrepancy of just 0.30% between the average one-year term and longer-term fixed rate bond, this may not be as much of a driver to entice savers into the commitment of a longer-term deal. As it stands, savers would be wise to keep a close eye on the market as it is uncertain how long these cuts will last.”


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