Savers are seeing the biggest cuts to one-year fixed rate bonds and Isas in fifteen years

One-year fixed rate bonds and Isas saw their biggest monthly rate cuts in almost fifteen years in January.

The average one-year fixed-rate government bond fell this month to 4.87 percent from 5.15 percent last month.

This is the first time since July 2023 that the average interest rate has fallen below 5 percent, and it is the largest monthly drop since February 2009, according to new figures from interest rate monitor Moneyfacts.

Fixed rate accounts and Isas have been declining across the board for some time.

However, all is not lost for savers who want to put their money aside for twelve months, as there are still a handful of providers who increase interest rates instead of lowering them.

However, they may need to be quick as the best rates often don’t last long.

On Friday, Hodge Bank increased the one-year interest rate from 5.04 percent to 5.1 percent and Tesco Bank increased the one-year interest rate from 4.7 percent to 4.9 percent.

But if you want the highest interest rate, Al Rayan’s one-year fixed rate deal tops the table and pays 5.3 percent. If a saver were to put €5,000 into this account, which is the minimum deposit, they would have €5,265 at the end of the term.

In the Isa market, Hodge Bank has also increased the interest rate on its one-year Isa rate from 4.89 per cent to 4.95.

> Find the best rates – check our savings tables to stay informed about the best purchases

As the end of the tax year approaches, higher rate taxpayers with more than £10,000, or basic rate taxpayers with more than £20,000 saved in the highest paying savings accounts, may find themselves breaching their personal savings allowance and having to pay tax on interest as a result.

Isas are a way to avoid this.

James Blower, founder of website Savings Guru, says: ‘ISAs are worth a look, with eight providers paying 5 per cent or more for easy access and also two fixed rates above 5 per cent.’

The very best one-year fixed rate Isa pays 5.01 per cent and is offered by Shawbrook Bank. If you were to put $5,000 into this account, you would have $5,251 at the end of the term. The minimum amount you can save in this account is € 1,000.

Rachel Springall, financial expert at Moneyfacts, said: ‘A new Isa season should see a flurry of activity among providers and, following the 2023 interest rate rises and upcoming Isa reforms, there could be more demand for them from savers who are close to the market. violating their personal savings allowance.”

Despite one-year savings rates largely faltering, average interest rates are higher than they were at the start of 2023, so there are some bright spots for savers.

Bright spots: Savers who get rid of a solution may still find they can get a better rate

Springall says: ‘Many savers who benefit from fixed rates today will get better returns if they want to take out a deal with a similar term.

‘Longer-term fixed interest rates currently provide less than one-year options on average, but with interest rates expected to fall this year, some savers may decide to lock in for longer.

‘Savers who prefer to keep their money within reach will find that easily accessible rates are now much higher than a year ago, but returns have fallen slightly month-on-month.

‘Savings providers will no doubt be aware of the ongoing murmurs about the Bank of England base rate falling in 2024, but even if this doesn’t happen in the coming months, variable interest rates could still change.

‘Providers will look closely at their interest margins, the swap market and their own position in the top interest rate tables compared to their peers.

“There could be a rapid move if they get way ahead of the competition or if they take in too many deposits.”

Outside of the one-year fixes, average rates on other accounts have also fallen, but not as dramatically.

The average fixed bond with a longer term fell for the fourth month in a row, from 4.76 percent to 4.46 percent. According to Moneyfacts, this was the biggest monthly drop since February 2009.

A longer-term bond is a bond with a term of more than 550 days, or approximately 18 months.

The average one-year fixed Isa fell for a month in a row to 4.72 per cent, down from 4.99 per cent, the biggest monthly fall since March 2009.