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Interest on fixed rate bonds slips further

Interest on fixed rate bonds slips further
Paloma Kubiak
Written By:
Paloma Kubiak

Savers are urged to review their accounts, as fixed rate bonds at the shorter end of the spectrum are offering less interest compared to last month.

There’s some good news and bad news for savers this week. On the plus side, there are more than 1,300 savings accounts that beat inflation, which stood at 3.2% in the year to March 2024.

However, on the flip side, top fixed savings deals have endured further rate cuts over the past month.

Indeed, while the best deals today are still paying over 5%, at the start of 2024, the top rate paid was 5.5%.

According to data from Moneyfacts, the top one-year fixed rate bond is offered from SmartSave at 5.17% AER. However, just last month, the top deal came in at 5.27%.

Meanwhile, savers opting for a two-year bond can net 5.1% AER from iFAST Global Bank. This is a touch lower than the 5.11% AER offered by Oxbury Bank last month.

And for any saver coming to the end of their current one-year or two-year deal, Moneyfacts revealed they can beat the market leader from April 2023. Further, those savers coming off a two-year fixed bond will find rates more than double the top rates available in April 2022.

Rates on easy-access accounts remain stable, with the top payer continuing to offer 5.2% AER (Ulster Bank).

ISA season top savers

Turning to ISAs, Moneyfacts revealed that easy-access ISA rates have increased over the past month, from 5.11% to 5.16% (Moneybox).

However, there has been downward movement in the one- and two-year fixed rate ISA categories.

Here, last month’s leader in the one-year saver category could gain 5.25% from Virgin Money. This month, the provider is offering 5.05%. The top two-year rate has also slipped from 4.81% to 4.65%.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said savers will find a bit of volatility within the top rate tables since last month, “so it’s essential to review their nest egg to ensure it’s still paying a competitive rate”, particularly in light of the eroding effect of inflation.

Springall said: “In the run-up to the new 2024/25 tax year, it proved to be a positive ISA season. Easy-access cash ISAs thrived, which is great news for those who want to utilise their allowance but require some flexibility with their nest egg.

“The new ISA rules may also encourage savers to use ISAs more this year. Those looking to invest for longer will still find the top fixed ISAs are paying less than their fixed rate bond counterparts, but fixed bond rates are higher than this time a year ago, so those who invest could end up breaching their Personal Savings Allowance (PSA).”

She added: “Switching accounts is essential for any saver who finds their loyalty is not being rewarded. Considering the more unfamiliar brands is wise, but it’s important consumers take time to review any restrictive criteria an account can impose to ensure it works for them.”