Fixed and variable savings rates fall further

The number of savings accounts and ISAs available also dropped month-on-month.

Savings and ISA rates fell across both fixed and variable sectors in August, according to the Moneyfacts UK Savings Trends Treasury Report.

This is the first time all rates dropped month-on-month since the start of 2024.

Savers have enjoyed high interest rates over the past year so news of their decline will be disappointing, but perhaps not too surprising as many providers started to make cuts after the Bank of England lowered the base rate to 5% at the start of the month.

While variable rates are particularly affected by changes in the base rate, fixed savings rates also saw significant reductions throughout August.

Cash ISAs plummet

The average easy access cash ISA rate fell from 3.36% at the start of August to 3.29% at the start of September.

Meanwhile, the average notice ISA rate saw an even larger drop from 4.22% to 4.08% over the same period.

“Cash ISAs caught up with the rate-cutting trend during August and noted the biggest month-on-month fall to the average easy access ISA rate and notice ISA rate in over four years,” Rachel Springall, Finance Expert at Moneyfacts, pointed out.

“Fixed ISAs also dropped by notable margins month-on-month,” she added, with the average rates of one-year ISAs and longer-term fixed ISAs (fixed ISAs with terms of more than 550 days) seeing their largest monthly falls since February 2024.

The average one-year ISA rate dropped to 4.29% at the start of the month while the average longer-term fixed ISA paid an even lower 3.92%. This compared to 4.46% and 4.08% respectively at the start of August.

How have savings rates changed?

Rates on standard savings accounts also declined in August, with fixed bonds seeing a more notable drop than variable accounts.

The average easy access and notice rates both fell by 0.07 percentage points to stand at 3.07% and 4.23% respectively at the beginning of September.

However, one-year fixed bonds fared even worse as average rates fell from 4.63% to 4.43% in the month to September.

And, for savers looking to lock away their money for more than one year, the average rate on longer-term bonds dropped to 3.99% in September, the first time it has dipped below 4% since April 2023.

Time to act

It seems likely that savings rates will continue their downwards trend, particularly as many experts expect a further cut to the base rate before the end of the year.

As a result, it’s important to review your savings to see if you’re getting the best return on your money, especially if you haven’t checked your current interest rate or switched accounts in several years.

There were 1,447 savings accounts to choose from at the start of September. Although this was slightly lower than the 1,455 options available in August, there are still plenty of accounts for savers, including some that continue to pay competitive rates.

“Whichever account savers choose, it is imperative that they explore the more unfamiliar brands, as challenger banks currently pay some of the best rates on the market,” Springall explained.

“However, these deals can change quickly, as providers need to react swiftly to any market movements to compete with their peers,” she continued.