With easy access rates falling, it could be time to make a biennial 5% fix, says SYLVIA MORRIS

We savers like an easily accessible account. There is an incredible £910 billion in it, more than three times the £269 billion in fixed rate bonds.

It may be tempting to stick with an account that allows you to access your money at any time, but now is the perfect time to consider a fixed-rate bond.

Interest rates on easy-access accounts are starting to fall, but those on fixed-rate bonds are still rising – but probably not for much longer, so trade while you can.

In its forecast last week, the Office for Budget Responsibility predicted that inflation would fall below the Bank of England’s target of 2 percent within months – almost a full year earlier than predicted six months ago.

As inflation decreases, it is likely that interest rates will too. Money markets expect the Bank of England’s base rate to fall from 5.25 percent this year to 4.2 percent in the final quarter of 2024.

That makes easily accessible reductions in bill rates more likely. Four providers – Paragon Bank, Close Brothers Savings, Virgin Money and Hampshire Trust Bank – have already reduced their top rates.

But interest rates on fixed-rate bonds have risen sharply as competition between providers increases.

While the highest easily accessible rate is 5.08 percent from Charter Savings Bank; you can get a higher interest rate on a one-year bond of 5.28 percent with SmartSave.

The top two-year rate is now 5 percent, following increases from Hampshire Trust Bank and Close Brothers. Hodge Bank is also paying 5 percent and others may soon join.

It can be difficult to take out a longer-term solution because your money is locked away until the end of the term.

But if you plan to take out a one-year bond now and then take out another bond in 12 months, you might be better off going for a two-year bond.

Because if you earn 5.25 percent for a year now, you will have to find a new one-year bond that pays at least 4.75 percent next year, to supplement the top 5 percent two-year bond available now. A year from now, rates will likely fall below this level.

Five-year fixed rate accounts pay less than shorter-term interest rates, and you may have difficulty tying up your money for that long.

The highest rate is 4.54 percent from Hampshire Trust Bank or 4.53 percent from both Shawbrook and Close Brothers.

But if you know you don’t need your money, this could be a good bet as interest rates will likely drop.

A cash Isa can also be a good option for a longer-term solution as you can take out an Isa whenever you want and get your money back. You may miss out on interest or have to pay a penalty, but you can get it in an emergency.

Rates for five-year fixes are lower with Isas: you can get just over 4 per cent from Close Brothers, United Trust Bank, Secure Trust, Zopa, along with Principality and Nottingham Building Society.

If you do opt for a one-year bond, make sure you choose one that pays interest and you can withdraw it at the end of each year, rather than a bond that pays interest at the end of the year pays out the full amount.

If you receive all the interest at once, it will count towards your personal savings deduction in that tax year.

This allowance allows you to earn up to £1,000 in interest if you are a basic rate taxpayer, and £500 if you are a higher rate taxpayer and you have no deduction if you are an additional rate taxpayer. Anything you earn above your limit will be taxed at your income tax rate.

If you receive all your interest at once, you run a greater risk of exceeding your personal savings than if it is topped up every year during the life of your account.

NS&I will offer bonds with a mid-market interest rate

Good news for savers: National Savings & Investments (NS&I) is launching a three-year bond known as the British Savings Bond next month.

NS&I has not yet announced when the price will go on sale, only announcing that it will be ‘early April’.

But I suspect this will be in the first week, which coincides with the start of the new financial year on April 1.

It has also confirmed that the rate will be priced ‘middle of the market’ compared to the rate paid by other providers.

The best interest rate now is 4.65 percent, fixed for three years (Hampshire Trust Bank), but they are as low as 3.65 percent or 3.7 percent (Co-op Bank and Santander).

To be in the middle bracket, I think NS&I would opt for a rate of around 4.15 percent.

The interest rate should certainly be better than that offered to the 400,000 savers in the three-year guaranteed bonds.

These have not been for sale since September 2019 and the interest on such bonds is a paltry 3.45 percent, after being reduced from 5.8 percent at the beginning of this year.

The big advantage of NS&I is that all your money is guaranteed by the government.

But be warned: because of the way the bonds are structured, you run the risk of having to pay taxes on your interest.

Sy.morris@dailymail.co.uk