Savers in the UK are facing a challenging landscape as average fixed rates on bonds and Cash ISAs have dropped to their lowest levels in over a year.
The decline marks the third consecutive month of falling fixed bond interest rates, according to recent data from Moneyfactscompare.
The average one-year fixed bond rate has fallen to 4.31 per cent, its lowest point since June 2023, while the average longer-term fixed bond rate has dipped to 3.93 per cent, a level not seen since March 2023.
Similarly, Cash ISAs have not been spared, with the average one-year fixed ISA rate dropping to 4.18 per cent, its lowest since June 2023, and the average longer-term fixed ISA rate falling to 3.88 per cent, a low not experienced since April 2023.
The decline in savings rates extends beyond fixed-term products. The average notice rate fell to 4.21 per cent, its lowest since October 2023, whilst the average notice ISA rate dropped to 4.03 per cent.
Easy access rates remained relatively stable, with the average easy access rate holding at 3.07 per cent and the easy access ISA rate slightly decreasing to 3.28 per cent.
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Despite the rate cuts, product choice in the savings market has shown resilience. The total number of savings deals, including ISAs, rose to 2,015, with Cash ISAs specifically increasing to 555 deals.
However, the number of savings providers decreased by one compared to the previous month, now standing at 142.
This suggests a competitive market where providers are adjusting their offerings in response to changing economic conditions.
Rachel Springall, a finance expert at Moneyfacts, broke down the current state of the savings market.
She explained: “Savers looking to secure a guaranteed return may be disappointed to see average fixed rates on bonds and Cash ISAs drop to their lowest levels in over a year.
“However, the margins of cuts month-on-month across one-year and longer-term fixed bond and ISA average rates were lower than the previous month.”
Springall noted that further rate drops could be on the horizon due to expectations of a Bank of England base rate cut before year-end.
Despite the rate cuts, she highlighted that product choice remains resilient across the market.
Britons are looking for the best savings deals
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Springall also pointed out that the average shelf-life of a fixed rate bond has increased to 57 days, up from 51 in September, reaching its highest level since March 2022.
Those coming off fixed deals will find average rates more than one per cent lower across one-year and longer-term fixed bonds and Cash ISAs compared to a year ago, according to the finance expert.
However, she noted that interest rates remain higher than six months ago, with one-year fixed bonds and Cash ISAs offering 0.29 per cent and 0.33 per cent higher rates respectively.
Springall recommended exploring all savings account options before investing, considering both potential returns and tax implications.
