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Fixed savings rates rise across the board

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Average fixed savings rates have risen across the board for the first time since December 2018 as providers appear to be competing for customers.

The average fixed rates for one year and longer-term fixed bonds as well as ISAs have risen month-on-month for the first-time since December 2018.

Data from Moneyfacts revealed that the average one-year fixed rate bond rose from 0.63% in August to 0.65% in September while the average longer term fixed rate bond has risen from 0.84% to 0.86%.

The average one-year fixed rate ISA has also notched upwards, from 0.56% to 0.58%, while the average longer term fixed rate ISA has risen from 0.75% in August to 0.78% in September.

Moneyfacts also revealed that the average shelf life of a fixed rate bond has fallen to the lowest number of days in over a decade – from 36 days from 42 last month.

Meanwhile, since September 2019, average savings rates for easy access accounts and easy access ISAs have fallen by around two thirds.

The number of live savings products has increased again this month, but year-on-year figures show that the market has contracted by 23%.

Rachel Springall, finance expert at Moneyfacts, said there appears to be some signs of life in the savings market as providers have recently improved rates on fixed rate bonds and ISAs and special attention appears to have been focused on the one-year sector.

“This competition means that savers would need to act quickly to take advantage, as the average shelf life for a fixed rate bond has fallen to its lowest point in over a decade, at 36 days, down from 42 a month ago,” she said.

She added: “While the uplift in rates is positive, especially as rates had been at record lows only one month ago, it is too soon to tell whether this will be set to continue. Savings rates are still down significantly compared to a year ago, even with fixed rates rising there is still much room for improvement. The average one-year fixed bond rate has risen to 0.65%, up by 0.02% since a month ago, but this is half that of a year ago of 1.34%. Indeed, a year ago savers could get a return of 2% on a one-year fixed bond, but this is unheard of today.”

Springall said that while ISA rates and choice of deals have improved this month, the differential in rates between fixed deals outside of an ISA wrapper could deter some savers.

“Regardless of this, it is vital savers consider utilising their ISA allowance as its tax-free benefits last for years to come, whereas the Personal Savings Allowance, where most UK taxpayers are able to earn up to £1,000 of income from savings tax-free, could be pulled with little notice,” she said.

“The number of savings options for consumers is starting to rise, but with the market contracting by 23% since September 2019, savers may understandably be left dejected by such a substantial fall in the choice of deals available to them. As it stands, it is the more unfamiliar brands launching an array of products to tempt savers and it is hoped this will persist in the months to come.

“In light of the uplift in rates and choice this month, savers will need to keep a close eye on the changing market and providers will need to act quickly to cope with excess demand. If providers do indeed hit their desired subscription limits, then they may cut rates or pull deals entirely to manage their exposure in the savings market.”

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