Savers are being urged to “lock in” competitive interest rates as returns attached to fixed-rate bonds continue to fall across the market.
The warning comes as rates above five per cent have vanished from the market, with experts suggesting they are unlikely to return following the Bank of England’s recent base rate decisions.
Data from Moneyfactscompare shows the top one-year fixed bonds have dropped to 4.85 per cent, with further decreases expected as providers adjust their pricing strategies.
Experts warn that attractive deals may have a shorter shelf-life in the current climate. The latest figures reveal a narrowing gap between short and long-term fixed bonds.
The difference between one-year and five-year fixed bonds now stands at just 0.21 per cent, down from 0.31 per cent a month ago.
This represents a significant shift from May 2024, when the top one-year rate was 5.18 per cent compared to 4.95 per cent for five-year bonds.
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Savers are being urged to “lock in” competitive savings rates
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Month-on-month data shows most top rates have remained stagnant, though one and two-year bonds have seen decreases of up to 0.10 per cent,
Almost all average interest rates have declined over the past month, with four-year bonds being the sole exception.
Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said: “Despite a short but welcome return during October, fixed rate bonds paying 5 per cent or above have yet again disappeared from the market.”
“With the Bank of England moving to reduce base rate, it is possible that this decision will impact providers pricing strategies, so it is unlikely that we will see them make a comeback,” she added.
Eastell noted that savers looking for better rates might find higher returns with challenger banks.
“Consumers would be wise to act with haste if they spot an attractive deal, as they may have a shorter shelf-life,” she warned.
The decline in rates becomes particularly stark when compared to last year’s figures.
In November 2023, savers could secure a one-year fixed bond at 6.05 per cent, significantly higher than today’s top rate of 4.85 per cent.
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Bank customers have been looking for the best savings rates GETTY The five-year fixed bonds have seen a similar downward trend, falling from 5.80 per cent a year ago to the current 4.64 per cent.
Savers with maturing one-year fixed bonds face returns that are 1.20 per cent lower than the market leader from last November, representing a substantial reduction in real terms.
“To avoid cuts further eroding deposits, it would be wise for savers to lock into a competitive rate,” advised Eastell.
She suggested that longer-term investments might be worth considering: “It may be worthwhile considering securing their cash for longer to reap the most benefits of higher-paying rates.”