Short term fixed rates hit two year high

04th July 2018

While we continue to wait for the base rate rise that never seems to come, providers appear to be a little more sure that one is around the corner. Fixed rate bonds for one, two and three years have been steadily on the increase in recent weeks and have now hit a two year high across all these respective terms.

The best one year bond is with Atom Bank paying 2.05% gross/AER, although as it can only be opened via a mobile app, this might not be right for everyone. The good news is that a battle between a number of other providers means that the next best is not too far behind. OakNorth Bank is paying 1.96% gross/AER fixed for 12 months.

Over two years, Investec Bank has jumped to the top and is now paying 2.20% gross/AER on balances of £25,000 or more. For those with smaller balances, Secure Trust Bank is snapping at Investec's heels with its bond paying 2.18% gross/AER.

Over three years, Charter Savings Bank is paying the top rate of 2.33% gross/AER.

Although more competition in the market is playing a part in driving rates up, with the next MPC meeting in August, providers appear to be pricing in the rise now - meaning that it could be a good time to lock in at the new best buy rates.

In fact, since rates hit a low point back in October 2016, best buy one year fixed rate bond rates are up by 46% and three year fixed rates are up by 41%.

Savings Index

Savings Ratio

This news comes as the latest figures from the Office for National Statistics show that we are saving less. The household savings ratio, the amount of disposable income that we are currently saving, has reduced by 0.40% to 4.10% for the first quarter of 2018, down from the previous quarter at 4.50%. This is following a record low level of just 3% at the beginning of 2017.

Source: ONS.Gov
We would hope that some positive news in the form of better rates might encourage more of us to save or at least see the benefits in doing so. With the Financial Services Authority potentially reopening the Cash Market Study to look at ways to get us more engaged in saving, the incentive of better rates should also help.
Although many savers still feel that the hassle in opening and monitoring their savings accounts means the extra interest is not worth their while, the record low rates that we’ve seen in recent years also haven’t helped.

But the tables are turning and rates are on the rise, so hopefully this will encourage more people to get back into the savings habit.

*We are occasionally paid by some providers if you click through from our Best Buy Tables and open a savings or current account with them. We will never accept a payment that compromises in any way our independent, whole of market approach to providing information on savings products. For clarity we will indicate those companies who remunerate us with an asterisk (*).

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