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Savers pile into fixed rate accounts in the hunt for higher interest

Savers pile into fixed rate accounts in the hunt for higher interest
Your Money
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Your Money

A quarter of people with cash savings have increased the sums in fixed rate accounts over the past year because of the better interest available, and because they think rates have peaked.

An estimated 11 million people have turned to fixed rate savings accounts, with half of those increasing their weighting by 20% or more compared to the percentage in instant access accounts.

According to Investec, 15 million people plan to increase the proportion of their savings held in fixed rate accounts over the next 12 months.

For around 10% of people with savings, they plan to increase their fixed rate accounts by at least £5,000.

Investec’s own customer data revealed a “continued shift towards longer dated deposit products”.

Between March and September 2023, the proportion of its UK savings deposits that were in fixed term accounts increased from 36% to 42%.

Indeed, figures from the Bank of England for the month of November 2023 revealed that £264bn was held in fixed accounts or bonds – an increase of £3bn. A similar increase (£3.3bn) was also recorded to cash ISAs, taking the amount held in them to £332bn as people locked in their money to gain higher rates of interest in tax-free savings deals.

The majority (61%) of Investec customers selected one-year deals, while a third opted for two-year products and 10% deposited their cash into three-year fixed rate deals.

For those who increased the amount of money in fixed term accounts, 56% said it’s because they offer better rates than instant access accounts.

Meanwhile, 28% said it’s because they thought interest rates have peaked and the only way from here is down.

Data site Moneyfacts also said savers may be disappointed to see some of the top fixed rates disappear, as a number of providers made rate reductions and withdrawals over recent weeks.

Currently, only savers searching for a shorter-term bond of up to two years can secure a fixed rate in excess of 5% AER, it said.

David Hunt, head of retail savings at Investec, said: “Savers are now able to access much better rates compared with several years ago, and many of the best deals are from fixed rate accounts. There is growing speculation that interest rates have peaked so it is not surprising to see many savers looking to lock in the best returns now. There are still some very generous rates on offer and our research suggests we will see more people locking in rates in the next few months.”

Related: ‘Hefty’ drops in the fixed term market: Top-paying savings accounts right now