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Hope for savers as interest rates begin to tick up

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Savings rates remain universally low but there are signs of a small bounce back.

Data from Moneyfacts shows the average rate across all variable and fixed rate products rose slightly between June and July, with one exception – notice ISAs.

The average return on a fixed rate bond increased month-on-month, the first rise since October 2020.

The average one-year bond now pays 0.52 per cent, up from 0.48 per cent, while the average longer-term fixed bond – deals with terms longer than 550 days – offers 0.77 per cent compared to 0.72 per cent.

Despite the encouraging signs, rates are still way off 2019 levels.

Two years ago, you could get 1.41 per cent on a one-year bond and 1.78 per cent on a longer-term product.

Meanwhile, the latest Moneyfacts data shows product choice overall rose between June and July. There are now 1,500 savings deals including ISAs on the market – volumes not seen since December 2020, when there were 1,514 deals.

Challenger banks have been largely responsible for breathing life back into the savings market, according to Rachel Springall, finance expert at Moneyfacts.

She said: “The injection of much-desired competition has been noticed even more recently, as challenger banks make their presence known in the top rate tables. In the past few weeks alone, there have been several rate increases to fixed bonds, many by challenger banks.

“However, the shelf life on a fixed rate bond fell to 53 days, showing signs that a good deal may not last too long as brands continue to react to market movements.”

Another positive change is a slight increase to the average easy access rate, from 0.16 per cent in June to 0.17 per cent this month.

Easy access accounts still remain extremely popular with savers, attracting £6bn in May and £56bn so far this year, according to Bank of England figures.

Click here for this month’s best savings deals

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