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SAVINGS ALERT: One-year bond rates are rising!

SAVINGS ALERT: One-year bond rates are rising!

Category: Savings

Updated: 01/06/2017
First Published: 04/08/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Savers have had little to be cheerful about over the past few years, with average rates being on a downward spiral and any returns minimal. But, research from Moneyfacts has uncovered some slight signs of life in recent weeks, and now, one-year bonds seem to be getting in on the action.

Cutthroat competition

There's been some welcome competition in the savings sector of late, largely the result of challenger banks entering the market. These newer, fledgling banks still need savers' cash to build their balance sheets, and they're actively competing in order to attract that kind of business – and savers are benefiting!

In fact, our research shows that rates for one-year bonds are increasing for one of the first times since the Funding for Lending Scheme was introduced two years ago, with the average and best rates on the market both being notably higher than they were at this point a year ago:

Aug-13 Aug-14 Today
Average one-year fixed rate bond 1.58% 1.41% 1.47%
Best one-year fixed rate bond 2.05% 2.01% 2.06%
Source: Compiled: 3.8.15

As you can see, there's a definite improvement. Indeed, the best rate available is now higher than it was two years ago, and although there's still a way to go before average rates get back to the dizzy heights of the pre-Funding for Lending Scheme era, any improvement will be welcome.

"It's great news that we are finally seeing a rate movement that will make savers smile," said Charlotte Nelson, finance expert at "The increase of the one-year fixed rate bond average from 1.41% a year ago to 1.47% today is very positive, and is the first time in a long while that we have seen rates increase for two consecutive months [the average has risen by 0.03% for the past two months].

"July finally seems to have seen the end of the rate-cutting trend, with more providers increasing rates on their one-year fixed rate bonds than decreasing them."

Challenger banks are leading the charge

It's great news for savers, and as Charlotte points out, this is all due to fierce competition between challenger banks. They're trying to dominate the sector and attract savers' cash, but as many of these brands are unknown, they have little to compete on apart from price.

"This is causing many of them to constantly fight for a market-leading position," added Charlotte. "In fact, all of the top five one-year fixed rate bonds on the market today are from non-mainstream banks."

So, it's time to make the most of it! One-year bonds can be the ideal solution for a whole range of savers, particularly those who don't want to tie their money up for too long with the prospect of a base rate rise looming. Any increase will hopefully have the knock-on effect of increasing savings rates, too, so a one-year fixed rate bond could be the perfect option for those who don't want to miss out on the opportunity to secure better rates in the future.

"The competition between these challenger banks will hopefully continue, keeping rates rising and spurring the main banks into offering better returns," concluded Charlotte. "However, savers know all too well that rates can fall just as quickly as they rise, so they shouldn't wait too long to secure a great one-year fixed rate deal." So why wait? Check out our best buys and take advantage of the competition to secure the kind of rate that hasn't been seen for years.

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.