One-year fixed savings accounts have been among some of the best savings deals over the past few months following a string of interest rate hikes, with rates reaching above 6%. But the latest signs show they might have reached their peak.
Since the Bank of England put a halt to interest rate rises in September and then kept them frozen at 5.25% again earlier this month, the top one-year fixed savings deals have taken a hit. The best rate fell below 6% on 10 November.
Previously, our best-buy table had seen one-year fixed deals reach 6.2% with NS&I’s one-year fixed bond, but this got pulled in early October. Currently, Metro Bank offers the top one-year deal at 5.91%.
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Find out if one-year fixed savings rates have passed their peak and how they compare to the rest of the market.
Have one-year fixed savings rates reached their peak?
It’s been a great few months for savers, with one-year fixed-rate savings deals reaching the dizzy heights of 6% or more - the best rates we’ve seen in 15 years.
On 14 September, the top 10 savings products on our one-year best-buy table all boasted rates of 6% or above, NS&I topped the table with its 6.2% rate, followed by Union Bank of India with 6.11% and Ahli United Bank UK with 6.1%.
It meant one-year fixed savings overtook the best easy-access savings accounts, which were offering just over 5% at the time, and one-year cash Isas, which remain at around 5.5%.
But, MoneyWeek research shows there have been no rate rises on one-year fixed savings since 9 October, and the top rates fell below 6% on 10 November.
Rachel Springall, finance expert at the comparison site Moneyfacts, said: "Month-on-month the average rates across fixed-rate savings bonds and ISAs have fallen, and there are no longer any providers offering a fixed-rate bond that pays over 6%.”
Union Bank of India was the last provider to offer a rate above 6% on a one-year fixed deal, which has now dropped to 5.9%. Here are some providers that offered above the 6% mark in the last couple of months, and what they currently offer now:
| Savings provider | Old rate AER | New rate AER | Current rate AER |
|---|---|---|---|
| NS&I | 6.2% | Withdrawn | Row 0 - Cell 3 |
| Union Bank of India | 6.11% | Row 1 - Cell 2 | Now 5.9% |
| Beehive Money | 6.1% | Withdrawn | Row 2 - Cell 3 |
| Ahli United Bank UK | 6.1% | Withdrawn | Row 3 - Cell 3 |
| My Community Bank | 6.07% | Withdrawn | Relaunched at 5.01% |
| SmartSave | 6.06% | Rate dropped to 5.99% | Now 5.81% |
| Ford Money | 6.05% | Rate dropped to 5.99% | Now 5.75% |
| Habib Bank | 6.03% | Rate dropped to 5.8% | Still 5.8% |
| LVH Bank via Raisin | 6% | Rate dropped to 5.9% | Now 5% |
| Ziraat bank via Raisin | 6% | Rate dropped to 5.9% | Now 5.5% |
Sarah Coles, head of personal finance at the wealth manager Hargreaves Lansdown, believes a 6% rate won’t see light in the near future. “We’re past the peak for savings, with the most competitive fixed rates across all periods now dropping below 6%.
“Fixed savings rates depend to a great extent on rate expectations, and as more players in the market come to the conclusion that we’re unlikely to get rate rises from here, we can expect fixed-rate savings to continue their slow march south. There won’t be any really dramatic shifts until the market widely expects rate cuts, so there is still time to bag a decent deal.”
How do one-year fixed savings deals compare to the rest of the market?
Currently, the top one-year fixed-rate deal is 5.91% AER offered by Metro Bank. The account requires a minimum deposit of £500 and you can save up to £2 million.
If you’re on the hunt for an account with a lower minimum deposit, JN Bank is offering 5.9% AER and you can start saving with £100. Union Bank of India is also offering 5.9%, however, it requires £1,000 to open the account.
It’s worth looking at Isas too as you can save up to £20,000 each tax year tax-free - which could be handy if you’re worried about paying tax on your savings interest due to high interest rates.
Plus, Isas could become more attractive with rumours of Isa reforms to be announced in next week’s Autumn Statement.
The top one-year cash Isa is currently 5.85% from Virgin Money, but you need to hold a Virgin Money current account to be eligible. The next best one-year Isa is from Zopa, offering 5.61% and you can start saving with just £1.
Charter Savings Bank is also offering 5.61% on its one-year fixed Isa, but it requires at least £5,000 to start saving.
Read more on which is a better home for your money- a savings account or a cash Isa?
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