One-year savings accounts beat the Bank of England’s base rate - should you fix your cash?

Several savings providers have upped their one-year rates meaning you can now earn more than the bank rate for the first time in over a month. Is now a good time to fix?

Savings rates are increasing
(Image credit: Getty Images)

Competition has returned among one-year fixed savings accounts as providers up their rates, with one bank matching the Bank of England’s (BoE) base rate and another beating it. 

It follows four months of banks and building societies lowering their returns on the best savings deals, with most dipping below the base rate, and some even reaching the 3% region. 

The downward trend was expected after the BoE froze interest rates four times at 5.25% - but it seems the latest pause on 1 February has had the opposite effect on the savings market. 

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Even though the current deals don’t live up to NS&I’s 6.2% one-year fixed bond from last summer or Metro Bank’s 5.66% one-year fixed saver (both of which are off the market), savers may want to take advantage of this so-called ‘blip’ while they can. 

“We have seen countless times, these deals can be short-lived due to being in the spotlight,” warns Rachel Springall, finance expert at Moneyfacts.

Find out which providers have upped their rates and what the outlook is for the savings market ahead of the next MPC meeting.

One-year fixed savings beat the Bank of England’s base rate 

MoneyWeek has been tracking the best savings accounts, and we have seen two significant changes on one-year fixed savings deals

  • Atom Bank upped the rate on its one-year fixed savings account to 5.25% AER on 27 February.
  • SmartSave hiked the rate on its one-year fixed saver to 5.26% AER today (28 February). 

The last time a one-year fixed deal surpassed the base rate was on 17 January, when SmartSave offered 5.31% and My Community Finance returned 5.28%. 

Four other providers have increased their rates on one-year fixed deals this month, although not reaching the base rate: 

Swipe to scroll horizontally
Provider Old rate AERNew rate AERCurrent rate AER
Shawbrook Bank 5.12%5.16%5.16%
Allica Bank 5.15%5.2%Changed to 5.16% on 27 February
Hodge Bank 5.11%5.16%5.16%
Stream Bank 4.9%5.15%5.15%

Despite all of the rate increases, Allica Bank dipped its rate just yesterday to 5.16%. 

Springall explains: “There have been a few providers slashing fixed bond rates over the past couple of weeks, jostling positions in the top rate tables amid volatile swap rates. However, this activity has calmed slightly over recent days.”

That said, savers should remain vigilant that rates could dip at any time as some lenders are continuing on a downward trend. 

Just today (28 February), Virgin Money lowered its one-year fixed rate from 5.11% to 4.86%. 

Two things you should keep in mind: the top ten one-year fixed savings deals on our best-buy guide still beat the current rate of inflation, at 4%, and one-year fixed deals now beat easy-access savings returns. 

How do fixed savings compare to the rest of the savings market?  

The rest of the savings market is also following suit with more attractive rates, but at a much slower pace. 

In the past week, we’ve seen the Co-operative Bank offer 7% AER on its regular savings account, the top rate on our regular saver best-buy table

Plus, four lenders have increased the rate on their easy-access savings accounts

These are the best rates on the savings market right now: 

Swipe to scroll horizontally
Type of accountProviderRate AERMinimum deposit
Easy-access savingsCahoot5.2%£1
One-year fixed bondSmartSave5.26%£10,000
Regular savings accountFirst Direct7%£1
Notice accountMarket Harborough BS5.45%£10,000

Although one-year fixed savings now beat easy-access deals, it’s still a close cut, so it’s worth thinking about which type of savings account will suit your needs best. 

An easy-access account is a great option if you’re looking for flexibility with your cash and you need to make withdrawals, which you can’t get with a fixed account. 

Another big difference to consider is that easy-access savings rates are variable, which means they can change depending on market conditions. 

Whereas one-year fixed savings guarantee that rate for the whole year, regardless of the rest of the savings market. 

 Will savings rates continue to rise? 

As the savings market heavily relies on the base rate, you might be asking, what is happening to interest rates?

Experts believe we have reached the peak and the BoE will not raise interest rates further. That sets expectations that we probably won’t see savings rates reach the 6% mark. 

Plus, most experts predict the base rate will be cut this year. 

“As we have seen in the past, any cuts to the base rate, or indeed expectations for interest rates to drop, can have a notable impact on variable savings rates, so it will be interesting to see how resilient the market will be in the months to come,” says Springall. 

But Susannah Streeter, head of money and markets at Hargreaves Lansdown, says this may not be until the end of the year. “Interest rate cuts are still in the pipeline this year, but it’s clear they’ll take a bit more time to flush out.”

Vaishali Varu
Staff Writer

Vaishali has a background in personal finance and a passion for helping people manage their finances. As a staff writer for MoneyWeek, Vaishali covers the latest news, trends and insights on property, savings and ISAs.

She also has bylines for the U.S. personal finance site and Ideal Home, GoodTo, inews, The Week and the Leicester Mercury

Before joining MoneyWeek, Vaishali worked in marketing and copywriting for small businesses. Away from her desk, Vaishali likes to travel, socialise and cook homely favourites

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