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Fixed bonds record biggest month-on-month rate falls in 15 years

Fixed bonds record biggest month-on-month rate falls in 15 years
Paloma Kubiak
Written By:
Paloma Kubiak

The average one-year fixed rate bond and longer-term deals offer cash savers less interest with each passing month, as further cuts may not be off the table yet.

One-year deals now average 4.62%, down from 4.87% recorded in January 2024. This is the lowest point since June 2023 (4.21%), but is still a decent way ahead of the 3.58% offered to savers this time last year, according to Moneyfacts data.

However, when it comes to average longer-term fixed bonds (terms over 550 days), rates have fallen faster over the past five months to now stand at 4.12%. This is the biggest month-on-month fall since February 2009, according to the Moneyfacts UK Savings Trends Treasury Report.

Given the movements, it means average one-year fixed rate bonds pay 0.5% more than longer-term rates.

Turning to ISAs, average one-year deals fell for a fourth consecutive month from 4.72% to 4.51% – the lowest point since July 2023 (4.46%).

Meanwhile, longer-term fixes also fell for a fourth consecutive month to 4.08%, standing at its lowest point since June 2023 (4.01%).

However, savers have a choice of 500 cash ISA deals to choose from, with a total of 1,859 savings deals (including ISAs), recorded in February.

Further, Moneyfacts has also seen some rate rises across product categories. The average easy access rate rose from 3.15% to 3.17%, while the average easy access ISA rate increased from 3.25% to 3.3%.

Rate cuts and competition

Rachel Springall, finance expert at Moneyfacts, said the incentive for savers to lock into a longer-term bond may have “waned” in recent months, but there’s hope some challenger banks may go against the rate-cutting trend, “as these brands can increase rates over the shorter term to attract deposits for their future lending”.

Springall said: “Savings providers have slashed rates across fixed rate bonds month-on-month, a sentiment that may continue over the next few weeks as they jostle positions in the top rate tables amid volatile swap rates. Despite these rate cuts, the shelf life of a fixed bond remained unchanged at 39 days, so there is a good stock of deals for savers to choose from, but the rates offered are lower month-on-month.”

She added: “Savers may be disappointed to know that the cuts across fixed rate bonds have played their part in a substantial drop in options that pay above the Bank of England (BoE) base rate of 5.25%.

“Indeed, around 99% of savings accounts that pay interest on a £5,000 balance now pay below 5.25%. This should encourage savers to review their accounts regularly and switch if they are getting a poor return on their hard-earned cash, particularly if they have an easy access account with a high-street bank.”