Lower than expected inflation means that it’s more likely than ever that we are at the top of the current interest rate cycle. And I’m afraid that sentiment is certainly being seen in the best buy tables.
The last of the 6% fixed term bonds have disappeared and we’ve seen the top rates on offer continue to fall ever since. Variable rate accounts have held up a little better – but we may well see the savings market settle down a little now. Hopefully rates will stop falling as there is no expectation that the base rate will start falling any time soon, even if it has stopped rising.
RATES ARE CORRECT AS AT THE TIME OF PUBLICATION (17/11/2023). All up-to date rates can be found on our Best Buy tables.
Although the top rate of offer has fallen a little over the last month, there has been plenty of activity which means there are still multiple accounts available paying over 5%.
Chorley Building Society’s restricted access account Easy Access Saver Account (1 withdrawal) paying 5.30% AER was withdrawn at the end of October, leaving Paragon in the top spot with its Double Access Account Issue 3 – another restricted access account.
Unfortunately Paragon shortly replaced Issue 3 with Issue 4 of the Double Access Account – paying a lower rate of 5.16%, taking into 3rd spot behind Ulster Bank’s Loyalty Saver and Nottingham’s Beehive Limited Issue Easy Access account, both paying 5.20% AER, although the latter was withdraw just a couple of days later – leaving Ulster Bank standing solo at the top. However, it’s reign was short lived as Metro Bank stormed to the top at the beginning of last week with its Instant Access Savings (Limited Edition) account paying 5.22% AER.
As we end the week, the average of the top five easy access accounts is 5.17% - which is down slightly from a high of 5.23% a month ago. But interestingly, none of the top five are restricted access accounts – whereas a month ago, three of them were!
Across the board, the best rates on offer have been falling as the markets get used to the idea that base rate has likely peaked. There are now NO fixed rate bonds available that paying 6% or more.
A month ago, there were two bonds paying more than 6%. 6.11% with Union Bank of India and 6.03% with Habib Bank - and the worst of the top five was paying 5.90%. Fast forward to today and whilst both of those providers are still in the table, the top two bonds are paying 5.91% (Metro Bank) and 5.90% (Union Bank of India) - so there has been a fairly significant reduction. That said, things seemed to have slowed a little in the last week, with just a couple of bonds that have been withdrawn.
And Metro Bank has come back into the mix launching a market leading bond paying 5.91% AER, keep a little competition alive.
As we end the week the average of the top five is now 5.83% - but rates are still pretty good, so there’s plenty to choose from if you want to fix some of your money for the shorter term.
It’s a very similar story in the 18 months/2-year table although as we know, the longer the term, the lower the best rates available tend to be.
A month ago, the top two rates were both with Union Bank of India – an 18-month bond and a 2-year bond, both paying 6.05% AER. But they are long gone.
Again, Metro Bank has launched a bond this week taking the top spot – paying 5.91% so matching its 1-year offering. But with many accounts being withdrawn over the last four weeks, the average of the top five has dropped from 5.96% to 5.72% - so the best buy rates are dropping quickly.
Longer Term Bonds
It’s been even more severe in the 3-year and 5-year tables.
JN Bank has lost its crown in the 3-year table after reducing the rate on offer from 5.90% to 5.50%, leaving the Hinckley & Rugby Building Society in the top spot and pulling the average of the top five from 5.86% to 5.49%!
JN Bank is still in the top spot in the 5-year table bit the rate has dropped down from 5.80% to 5.50%. And with other withdrawals and reductions over the last month, the average rate of the top five has dropped by 0.37% AER from 5.61% to 5.23%.
This is another indication that the markets believe base rate has now peaked – and at a slightly lower level that previously expected. Other than that, there is little to report.
After all the excitement of the last few months, all in all, it’s pretty disappointing. But with inflation falling to 4.6% in the 12 months to October 2023, any of these bonds are now inflation beating, which we haven’t seen for a long time – so definitely something to celebrate.
And if inflation continues to fall to closer to its 2% target – which could mean that interest rates will fall too, locking in for the longer term now might look like it was a very sensible decision further down the line.
Unfortunately the bad news continues into the Fixed Rate ISA arena too.
Over 1-year Castle Trust Bank was at the top of the table paying 5.75% at our last review but this account was soon withdrawn, leavings UBL back in its familiar top of the table position paying 5.70% AER. And there it remained until the beginning of this month when it was withdrawn and replaced with a lower paying ISA of 5.60%, leaving Charter in the top spot paying 5.67%. But this too was withdrawn which meant UBL looked like it might have gone back into top spot unintentionally were it not for Zopa launching a new market leading ISA of 5.61%. The remained at the top until earlier this week when Metro Bank launched a new table topping account offering 5.71%.
As we end the week, this ISA is still in 1st place and Zopa is second, although the rate on offer has fallen to 5.47%.
Over 2-years, the news is much the same with the top rate on offer dropping from 5.65% a month ago to 5.40% today with Saffron Building Society.
In the 3-year cash ISA table, unfortunately there is also really nothing positive to report! A month ago the top rate on offer was with Zopa paying 5.37%, but today, although Zopa is still at the top of the leaderboard, the current rate on offer is just 5.16%.
Over in the 5-year table, a month ago all of the top five were paying 5% or more but today the best you can find is 4.91% - again with Zopa.
So as with Fixed Rate Bonds, you might want to move quickly if you want to secure a rate at the current levels as the trajectory appears to be downwards.
Keep an eye on out best buy tables just in case anyone has a surprise on offer.
There’s was a bit of short-lived excitement in the easy access cash ISA table a couple of weeks ago in the form of the Double Access Cash ISA (1st Edition) from Mansfield Building Society which leapt to the top of the table paying a rate of 5.50% AER – leaving the previous leader, Zopa, for dust with a rate of just 5.08%.
Teachers Building Society was the next to make a move with another restricted access ISA, Triple Access Cash ISA for Everyone (Iss 1) paying 5.10%.
Then earlier this week, once again Metro Bank is back in the table with an unrestricted easy access ISA paying 5.11%. With the Mansfield ISA being withdrawn just a couple of days later, as we end the week Metro has risen to the top spot. And with Teachers Building Society withdrawing its ISA, that leaves Zopa back in second place, still offering 5.08% AER.
Let’s see if there’s any more activity to come.
Whilst there has certainly been a slowdown in the competition on some of our tables, there are still some great rates to be found, especially if you have cash languishing in a poor paying account. So, take a look at our best buy tables, and vote with your feet if you are not earning as much as you can.