Average rate for a longer-term fixed bond falls for first time in over six months

This is the first time average rates have fallen in this sector since March 2023.

The average rate paid by a fixed bond with a term over 550 days dropped to 5.11% at the start of October, according to Moneyfacts’ data. This is the first time this rate has fallen since March 2023.

It’s a similar story when it comes to longer-term fixed ISAs. While average returns in this corner of the market didn’t drop at the start of the month, there was no improvement either, with the average rate remaining unchanged at 5.02%.

“One area of the market not blessed by rate rises this month is longer-term fixed bonds,” said Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

This signals “a turnaround for the longer-term fixed rate market”, Springall went on to add, brought about by a pause in the Bank of England base rate and the markets expecting rates to drop in the coming months.

While the average rate for a longer-term fixed bond fell at the start of October, it’s important to note this was only a slight drop down from 5.12% the previous month.

It’s still possible to find rates of around 6.00% AER offered by longer-term bonds if you’re willing to consider challenger banks. For instance, Union Bank of India (UK) Ltd pays 6.05% AER with its two-year Fixed Rate Deposit and Union Premier Bond. Meanwhile, the three-year and five-year Fixed Term Savings Accounts from JN Bank offer 5.97% AER and 5.80% AER respectively.

If you’re considering investing in a longer-term fixed bond or ISA, the recent fall in average rates means you may need to act quickly to take advantage of some of the highest rates.