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One-year fixed rate bonds finally break cycle of back-to-back cuts

One-year fixed rate bonds finally break cycle of back-to-back cuts
Paloma Kubiak
Written By:
Paloma Kubiak

The average one-year fixed bond rate has risen, abruptly stopping the cycle of cuts over the last seven months, data reveals.

The average one-year fixed rate bond stands at 4.59%, edging up a smidgen from the 4.58% recorded in May.

However, this slight increase is significant, as it’s the first time since October 2023 that rates have nudged upward, instead of downward, according to Moneyfacts.

Longer-term fixed bonds – over 550 days – have also risen in the month to June, from 4.12% to 4.13%. This is the first time the category has risen since March 2024.

The average easy-access rate also edged up from 3.11% recorded in May to 3.12%. Again, Moneyfacts revealed this is the first increase since March 2024.

Meanwhile, the number of savings products on the market rose from 1,388 to 1,420, giving people more choice, while the number of cash ISA deals also increased from 547 to 553 – the highest count since February 2007, when Moneyfacts started collating this data. In total, it means there are 1,973 live products in June, the highest count since October 2023 (1,979).

But, that’s where the positive cash savings news ends, as the data provider revealed that on the ISA side, the average easy-access rate fell from 3.34% to 3.31%. Notice ISAs also declined from 4.28% to 4.27%. This is the first fall since March 2024.

Elsewhere, it noted that the average one-year fixed ISA rate fell to 4.40% from 4.42%, taking it to its lowest point since June 2023 (3.96%). And, turning to the average longer-term fixed ISA rate, this came down from 4.06% to 4.04%.

Savers urged to ‘chase the best rates’

Rachel Springall, finance expert at Moneyfacts, said challenger banks were “notably active” in the one-year fixed rate bond sector, helping to drive up rates and stemming consecutive rate cuts.

She added: “The average shelf-life of a fixed bond rose to 48 days, its highest point since February 2023. Fixed rates have been rising due to volatile swap rates and lesser expectations of an imminent cut to the Bank of England base rate. However, it is widely anticipated that interest rates will come down in the future, so savers will need to decide whether now is the time to lock in to a longer-term fixed bond instead.”

Springall added that savers who’ve not yet used up their annual ISA allowance may be disappointed by the decline in rates, while those with an easy-access account should check what rate their money is earning to ensure they’re getting the best deal.

The expert said: “Those savers unfamiliar with the brands that sit in the top rate tables should keep in mind that, when protected by the Financial Services Compensation Scheme [FSCS], they would have the same level of protection as a well-known high street bank. Savers would be wise to review and switch their accounts regularly if they want to chase down the best rates.”