Fixed-rate savings hit 10-year high while ISAs hit 9-year high

Average fixed bond yields hit their highest levels since 2012 as savers saw increases on variable products and ISAs over the past seven months.

The average one-year fixed rate bond stands at 2.29%, its highest level since November 2012, compared to 1.97% last month and 0.65% in September 2020, according to data from Moneyfacts.

He said the one-year fixed bond arena “remains extremely competitive” with the average yield exceeding 2% for the first time since December 2012 (2.11%).

Meanwhile, the average one-year fixed-rate ISA has nearly quadrupled in two years, from 0.58% in September 2020 to 1.96% today. This is the highest level since January 2013 when the rate was 2.18%.

Average easy access rates have also risen rapidly, from an average of 0.22% two years ago to 0.84% ​​in September 2022. Moneyfacts said this was the highest point for a decade (0.87% in December 2012).

Elsewhere, data from Moneyfacts revealed that product choice for savers also rose for the seventh consecutive month to 1,754 savings offers (including ISAs).

This is the highest number since March 2020, when there were 1,768 produced, “well above the all-time high of 1,340 in April 2021”, he noted.

“Notable competition”

Rachel Springall, finance expert at Moneyfacts, said: “The average one-year fixed rate bond market was heated in August as we saw the average rate rise 0.32% month on month. other – the strongest monthly improvement since our records began.

“Savers looking to invest longer would also see rate hikes on longer-term fixed bonds, and due to the volatility of rate changes, the average shelf life of a fixed bond has dropped drastically. to 27 days, up from 40 days a month ago.. Providers are changing rapidly in response to competition, so savers can now find the best short-term fixed bonds paying rates above 3%.

“Consecutive base rate hikes have had a positive influence on variable savings rates, which, combined with notable competition, has seen the average easy access rate rise to its highest level since 2012. the momentum in this arena saw the average rate rise from 0.17% to 0.84%, about five times more than last year.

However, Springall said not all accounts have improved over this period, “so it’s critical that savers benchmark their existing accounts and switch to take advantage of current competition.”

She also said that while ISA rates improve, “there remains a noticeable rate differential between fixed bonds and ISAs, so savers will need to weigh any tax-free allowance they have before committing.”

ISA Outputs Accelerate

According to the Bank of England, ISA cash outflows continued in July, reaching £647m, from £210m a month earlier.

As interest rates continue to rise, savers with big pots may breach their personal savings allowance, “so we can see net outflows change,” Springall said.

She added: “However, the cost of living crisis may well lead savers to withdraw cash to cover costs.

“Savers’ attitude could be volatile in the coming months, both for those looking for fixed rates and for those who can withdraw their savings to cover the rising cost of living. To attract savers, providers will have to react quickly to compete with their peers and offer a range of products adapted to specific needs.

Comments are closed.