Savers warned to act quickly on rates after biggest monthly fall in a decade

savings accounts
savings accounts

Savers have been warned to act quickly after the average deal on fixed-rate accounts experienced its largest month-on-month fall in a decade.

January saw the largest drop in average fixed savings rates in more than 10 years, as the Bank of England edges closer towards a rate cut. The drop came after inflation rose for the first time since February 2023, up to 4pc from 3.9pc in November.

As of February 1, the average one-year fixed bond stood at 4.64pc, down 0.82pc from the recent first of the month high of 5.44pc last October.

The average one-year fixed Isa, which was at 5.27pc in October, dropped 0.76 percentage points to 4.51pc at the beginning of this month, analysts Moneyfacts found.

The trend is also evident for longer-term bonds. The average rate on four-year bonds dropped from 5pc in October to less than 4pc in February. On two-year fixed Isas, the average fell more than one percentage point, from 5.23pc in October to just 4.22pc.

Savers can still achieve more than 5pc on one and two-year bonds, but the top rate on a three-year bond is now just 4.6pc.

Variable rates have held firm, with the top accounts offering up to 5.15pc on a triple-access saver with Coventry Building Society.

The best easy-access account is a 5.10pc offering with Cynergy Bank, closely followed by Close Brothers Savings at 5.10pc.

The average interest paid on an easy-access account held steady at 3.17pc in February, compared to 3.19pc in November. On variable Isas, the average rate rose 0.05 percentage points in January to 3.30pc.

Variable rates are more closely related to the Bank Rate, which has been held at 5.25pc since August last year, following 14 consecutive increases from December 2021. The next Bank Rate decision will be announced on March 21.

Financial analyst Rachel Springall, at Moneyfacts, said: “Shorter-term fixed savings accounts can be a preferred choice amongst savers right now, however, typically a longer-term fixed bond is more attractive if there is an expectation for interest rates to plummet.“

She added: “Savers may need to act quickly to grab a top rate, particularly if offered by a challenger bank that reaches its funding targets.”

Sarah Coles, of investment platform Hargreaves Lansdown, warned that providers use “sleight of hand” to make variable rates seem higher than they really are.

She said: “The variable market will also use sleight of hand to keep the very best rates higher – like limiting who can open them, or how much of the balance will receive the highest rate, so the headline rate doesn’t always tell you the full story.”

Laura Suter, of broker AJ Bell said: “Anyone who wants to lock in a decent fixed-rate account should move quickly before more cuts are made.

“It also means that it’s a trickier decision when weighing up a fixed rate account vs an easy-access option, now that easy access accounts are paying more than fixed-rate options.”


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