Fixed bonds and ISAs fall month-on-month

But average savings and ISA rates remain higher than one year ago.

Fixed savings rates continued their downwards trajectory between the start of April and the start of May, according to data from the Moneyfacts UK Savings Trends Treasury Report.

The average one-year fixed bond dropped from 4.60% to 4.58% in the month to May, while the average one-year fixed ISA rate saw a more significant fall from 4.51% to 4.42% over the same period.

Average rates on longer-term fixed bonds and ISAs (with terms over 550 days) also declined month-on-month to stand at 4.12% and 4.06% respectively. This is a drop of 0.01 percentage points compared to the previous month.

“The longer-term bond average rate has now dropped by 0.90% in the past six months alone, with the one-year equivalent falling by 0.78% over the same period,” explained Rachel Springall, Finance Expert at Moneyfacts.

However, she pointed out that “the extent of the latest month-on-month cuts were more subdued than seen over the past six months.”

“Indeed, between the start of January and February 2024, the average longer-term bond rate fell by a staggering 0.34%, the biggest monthly cut seen in 15 years,” she continued.

Longer-term fixed bonds or ISAs are those with terms over 550 days. Average interest rates based on a £5,000 deposit as at the start of the month. Source: Moneyfacts Treasury Reports.

Easy access savings holding firm

Unlike the fixed accounts, the average easy access savings rate remained unchanged this month at 3.11%. This was particularly encouraging news as it fell from 3.18% to 3.11% between March and April; the largest monthly drop since June 2020.

Meanwhile, the average notice rate increased from 4.27% to 4.28% and the average notice ISA rate rose from 4.15% to 4.17% in the month to May.

However, after a flurry of activity in the ISA market around the start of the new-tax-year, this month saw the average easy access ISA rate fall from 3.38% to 3.34%.

Despite this, “variable rates on easy access and notice accounts have been generally resilient in recent months, and year-on-year, are paying over 1% more across the board, which includes easy access and notice cash ISAs,” noted Springall.

Average interest rates based on a £5,000 deposit as at the start of the month. Source: Moneyfacts Treasury Reports.

Elsewhere, the number of cash ISAs rose from 520 at the start of April to 547 at the start of May, the highest count since at least February 2007 (when Moneyfacts’ electronic records began).

The number of cash ISA providers also increased to 95; its highest level in more than 15 years.

Time to review your savings?

As average rates seem to have plateaued, with many beginning to fall, it’s worth reviewing your savings to see if you’re getting the best return on your money.

There are still several leading easy access savings accounts and easy access ISAs that pay more than 5.00% AER, although you need to bear in mind that the provider could change the rate on these accounts at short notice.

By contrast, fixed-rate bonds pay a guaranteed rate in return for locking your money away for the specified period. With many of these accounts paying well in excess of 5.00% AER, these could be an option if you don’t need immediate access to your money.

While the leading fixed-rate ISAs pay a lower rate than their fixed-rate bond equivalents, they may be worth considering if you’re at risk of going over your Personal Savings Allowance (PSA).

So, whether your savings are sitting in an account paying a low rate of interest or you’re coming to the end of a fixed-rate bond, it’s a good idea to compare accounts to find out what options are available to you.