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Rise in the number of providers cutting or pulling fixed rate bonds

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Written by: Emma Lunn
17/09/2019
Declining competition has seen the interest rates on fixed rate savings accounts fall during August, according to Moneyfacts.

Moneyfacts’ UK Savings Trends Treasury Report found that 44 per cent of fixed rate bond providers either withdrew products or cut rates last month.

In fact, the number of providers that have reduced rates or withdrawn fixed rate savings products has increased by 21 per cent in the past two months.

According to Moneyfacts, June saw 23 per cent of providers cut rates or withdraw products, this grew to 40 per cent in July, and to 44 per cent in August.

Less competition

The rate cuts and product withdrawals impacted both one-year and longer term bonds.

As a result, average rates for both long-term and one-year fixed rate bonds have fallen, with the average long-term fixed bond rate now at 1.64 per cent. This is the lowest average rate since October 2017 when it stood at 1.62 per cent.

The average one-year fixed bond rate is now 1.34 per cent – its lowest level since August 2018 when it stood at 1.32 per cent.

Competitive rates from challenger banks

Challenger banks continue to dominate the fixed rate bond charts offering the top rates for all terms.

In addition to this, all the current top rates are only available on accounts that can only be opened online, which means savers wanting to bank face-to-face will have to forego the most competitive rates to do so.

The overall best rate available in the fixed rate bond chart is currently an expected profit rate of 2.45 per cent on Gatehouse Bank’s Fixed Term Deposit. This five-year bond requires a minimum opening deposit of £1,000.

Bank of London and The Middle East (BLME) currently offers the top rate in the three-year fixed rate bond chart with its Premier Deposit Account paying an expected profit rate of 2.45 per cent on a £1,000 deposit. The one-year version of BLME’s Premier Deposit Account also tops the one-year fixed rate bond chart paying an expected profit rate of 2.1 per cent.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “It’s a worrying trend for savers to see, but it’s clear as day that fixed rates are tumbling.

“Savers who waited until September to grab a fixed rate bond will be disappointed to have missed their opportunity to get the highest returns, particularly on longer term fixed bonds, where the average rate has dropped to its lowest point since October 2017. If savers do now decide to invest, speed is of the essence because of the rate cut domino effect that is rippling through the top rate tables.

“Savings providers that sit in the top rate tables price their fixed rate bonds to gain attention, but if they feel they are getting inundated with deposits too quickly, they could not only cut their rate to ward off the hoard but withdraw the offer entirely, which we have seen occurring recently.”

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