Savers warned to buy fixed rates above 5% as best accounts could soon disappear
- Fixed interest accounts yielding more than 5% could disappear at the end of this month
- Only 1-year fixed interest accounts pay more than 5%
- Savers may now be better off considering locking in longer to get an interest rate above 5%
Savers looking for a savings account with a fixed interest rate of more than 5 percent would be wise to fix their savings now.
Fixed interest rates have fallen and savings experts expect fixed-rate accounts yielding more than 5 percent to disappear within a month.
The main fixed interest rates have been significantly reduced across the various terms.
An analysis by This is Money has found that since the base rate was cut to 5 percent last week, at least 100 savings accounts have had their interest rates cut.
This meant that the Union Bank of India’s one-year bond, which was carrying a yield of 5.4 percent, the highest yield in the market, was cut to 5.25 percent.
Vanished into thin air: Some of the best fixed rate deals have disappeared since the Bank of England cut the base rate to 5%
Savers can still find fixed rates that yield more than 5 percent, but only in the one-year loan market. There are no other fixed rates that yield more than 5 percent.
Access Bank had a two-year fixed rate account at 5.06 percent, but this has now been reduced to 4.9 percent. The best two-year account is offered by Birmingham Bank, which pays 4.91 percent.
> Fixed rate accounts: see the independent best-buy tables from This is Money
James Blower, founder of Savings Guru, said: ‘Thursday’s base rate cut came as a surprise to many providers and those who were paying too much were quick to adjust.
‘There are still a handful of one-year fixed rates above 5 percent, but the two-year rates above that have all disappeared now.
‘There are only 11 providers paying above 5 percent and only two above 5.1 percent. I expect the best bargains to be just above 5 percent by the end of next week and below that next month.
‘Savers must act quickly, because interest rates are not going up for the time being.’
| TERM | ACCOUNT | RATE |
|---|---|---|
| A year | Union Bank of India | 5.25% |
| Two years | Bank of Birmingham | 4.91% |
| Three years | Oxbury bench | 4.66% |
| Five years | Bank of Birmingham | 4.51% |
Should you now accept a fixed savings interest rate?
Savings experts predict that the base rate could be lowered again before the end of this year. Given how providers lowered the savings rate after the most recent base rate cut, it seems that there will be even more savings rates falling in the coming months and years.
Savers who can fix their savings for the longer term without having to look at them themselves are therefore told that the current fixed savings interest rate of five years could well be the best interest rate they will get for the time being.
If you are extremely interest-conscious, why not consider a combination of one, two or three year fixed rate products?
Those who do not feel comfortable putting aside their savings for such a long time can spread it over a mix of annual and long-term fixed loans.
Blower said: ‘The five-year rates look to offer excellent value given the outlook. Savers who don’t need access over that period could be well rewarded, as I expect five-year rates to fall below 4 per cent by 2025.’
Hagger said: ‘Economic experts are predicting more rate cuts in the next six to 12 months, but after that it is not certain in which direction rates will move and how quickly.
‘Five-year interest rates at 4.51 percent may seem attractive at the moment, but how many people are prepared to tie up their money for five years without having access to it?
‘If you are extremely interest-conscious, why not consider a combination of one-, two- and three-year fixed-rate products?
‘If you have some spare cash that you can tie up for a few years, RCI Bank’s two-year deal looks great, but it won’t last long so you’ll need to get started.’
Rachel Springall, financial expert at Moneyfacts, said: ‘Savers who are still on the fence about whether to invest their money in a fixed rate bond would be wise to do so as soon as possible, as the highest interest rates are not guaranteed to stay around for long.
‘Those waiting until their bond matures and unable to secure a new deal would be wise to brace for the impact, as rate cuts could be on the horizon. Savers need to act now to secure a new deal or face disappointment.’
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