Key facts
- Fixed-rate savings accounts are offering their highest returns in years, with some now paying up to 5.25%.
- The average new one-year fixed savings bond rate was 4.41% on Thursday.
- GB Bank, Shawbrook Bank and Vanquis were among those paying 5.25% on a five-year fixed bond this week.
- Some fixed bonds paid 6% as recently as late 2023.
- Many economists predict the Bank of England will lift the base rate before the end of this year.
- Easy access accounts are available paying up to 5%.
Fixed-rate savings accounts are currently offering their highest returns in years, with some accounts now paying up to 5.25%. This presents savers with a decision: lock in these competitive rates or wait for potentially higher returns amid predictions of further Bank of England base rate increases.
The data provider Moneyfacts noted that fixed savings rates have reached "multiyear highs" due to strong competition. As of Thursday, the average new one-year fixed savings bond rate stood at 4.41%. However, top-paying accounts offer more; GB Bank has a one-year fixed-rate bond at 5.05%, and Kent Reliance offers 5.06% on a 13-month account, both requiring a minimum deposit of £1,000.
Longer-term bonds offer even higher yields, with GB Bank, Shawbrook Bank, and Vanquis all offering 5.25% on five-year fixed bonds this week. Some savers may recall rates of 6% in late 2023, and further increases are possible if the Bank of England raises its base rate, which many economists anticipate before the end of the year.
Rachel Springall of Moneyfacts expects available deals to improve but advises caution due to the unpredictable path of interest rates. She suggests savers consider hedging their bets by splitting funds between a fixed-rate bond and a high-paying easy access account, which can offer up to 5%. Some fixed-rate bonds allow for "drip-feeding" cash, while others have limited funding windows.
Given ongoing concerns about the cost of living, particularly rising energy bills, it is advisable not to tie up all savings. Springall recommends diversifying across accessible accounts and utilizing tax-free cash Isas. While fixed cash Isa rates are often slightly lower, Shawbrook Bank offers a 5.25% rate on both its five-year fixed savings bond and its five-year fixed cash Isa. Savers can deposit up to £20,000 annually into Isas, though this limit will be capped at £12,000 for cash Isas from April 2027 for those under 65.