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Derin Clark

Derin Clark

Online Reporter
Published: 27/05/2020

Savers are sacrificing better rates available by locking into long-term accounts and are instead opting for short-term accounts.

In research published in an independent white paper covering the savings market, traffic data from found that consumers were favouring one year fixed rate bonds over those with longer fixed terms. In fact, the research revealed that one year fixed bond traffic achieve a 44% share of total website visits* for fixed rate bonds, while five year fixed bonds was just 10%.

Along with the increase in popularity of short-term bonds, our research also found that the difference in the average rate being offered on one year fixed rate bonds and five year fixed rate bonds has narrowed in the past year. As the below table shows, during January 2016 the difference in average rates between one and five year fixed rate bonds was 1.17%, while during May this year it was just 0.39%. A similar picture can be seen within the ISA market, with the difference in average rates between one and five year ISAs standing at ISAs standing at 0.94% in January 2016, while during May this year it was down to 0.42%.


Savings market analysis - average rates 

  01-Jan-16 28-Apr-20 22-May-20
Average one-year fixed rate bond 1.47% 1.03% 0.94%
Average five-term fixed rate bond 2.64% 1.39% 1.33%
Difference between one- and five-year bonds above 1.17% 0.36% 0.39%
Average one-year fixed rate ISA 1.40% 0.94% 0.80%
Average five-term fixed rate ISA 2.34% 1.27% 1.22%
Difference between one- and five-year ISA above 0.94% 0.33% 0.42%


Commenting on the research, Rachel Springall, finance expert at, said: Savers appear to be eyeing up shorter-term bonds to acquire a competitive rate of interest, guaranteed to be paid for the next twelve months, and less so eyeing up longer-term fixed deals. As it stands savers may not want to lock their money away beyond a year and in fact, interest rates on five-year fixed bonds may not be enough for them to consider.

“The difference in rate offered on one-year and five-year bonds has fallen by two thirds between January 2016 and today which is a huge change, indeed the differential rate was 1.17% but it is now 0.39%. This means there is less incentive for savers to choose a five-year bond over a one-year option.

“A similar pattern can be seen on ISAs, so those savers who turn to these tax-free vehicles year on year will see less reason to lock their cash away for five years. Indeed, the differential rate has halved compared to four years ago in January, down from 0.94% to 0.42% today.

“In light of these developments, savers may well be rushing to secure a competitive rate over the next twelve months before rates worsen, and as it stands there may be less demand for long-term bonds as the months progress.”

The best short-term savings accounts

Savers looking to lock their money into a one year account are urged to act quickly as the top rates are not expected to be around for very long. Springall explained: “Unless savings providers need to use savers deposits to fund their future lending, rates are not expected to improve drastically any time soon, so a good deal may not last very long if it becomes filled quickly.”

Currently the best rate being offered in the one year fixed rate bond chart is from Bank of London and The Middle East (BLME) which pays an expected profit rate of 1.45% gross on its Premier Deposit Account.

For those looking for a one year fixed rate ISA, Al Rayan Bank currently has the best rate with its Fixed Term Deposit Cash ISA paying an expected profit rate of 1.20% gross.


*Traffic to data based on the month of April.


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. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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