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Ella Mower

Senior Content Writer
Published: 16/01/2025
The words 'fixed rate bonds' written on a notebook, sat on a table next to a laptop and list of numbers.

With more cuts to the base rate on the cards for this year, this could see returns on savings plummet.

 

Savers looking to grow their money in 2025 may want to consider securing a fixed rate for their hard-earned cash – and soon.

On the face of it, this may seem counterintuitive; the best rate paid by an easy access savings account increased from 4.85% at the start of December to 4.89% at the beginning of this month and continues to outperform market-leading fixed rates, according to Moneyfacts data.

Yet, returns in this sector have fallen significantly since the start of last year, when the top easy access account paid 5.20%, following two base rate reductions in 2024.

With further cuts to the UK’s central interest rate on the cards for this year, the brunt of which are usually felt by variable accounts, this may make locking in a fixed rate seem all the more appealing.

 

What is a fixed bond?

Fixed bonds are a type of savings account that offer an interest rate guaranteed to stay the same over the course of a specified term. In exchange, you typically won’t be able to access your cash until the term ends.

This could protect against volatility in the savings market – especially if rates start to decline. But, keep in mind it could also see you miss out if savings rates were to rise.

Are fixed returns falling?

While the best one-year fixed rate saw a marginal drop from 4.80% to 4.79% in the month to January, market-leading three-, four- and five-year fixed returns held steady at 4.61%, 4.54% and 4.64% respectively.

Those expecting their two-year fixed bond to mature this year, meanwhile, will no doubt be pleased to learn the best rate in this sector rose from 4.60% to 4.65% month-on-month; Caitlyn Eastell, spokesperson for Moneyfactscompare.co.uk, said these top returns are comparable to when savers may have initially invested two years ago.

 

Graph showing top savings rates between July 2022 and January 2025 Graph showing top savings rates between July 2022 and January 2025
Graph showing top savings rates between July 2022 and January 2025 Graph showing top savings rates between July 2022 and January 2025
Graph showing top savings rates between July 2022 and January 2025 Graph showing top savings rates between July 2022 and January 2025

Graph: Best easy access and fixed savings rates on a first-of-month basis between July 2022 and January 2025.

Nevertheless, these very best rates remain a stark contrast to January 2024, when it was possible to secure one-, two-, three- and five-year bonds paying well in excess of 5.00% - proving fixed returns aren’t immune to changes to the base rate.

However, where variable rates are typically adjusted in response to a base rate cut or hike, banks and building societies tend to pre-empt changes to the UK’s central interest rate in their fixed pricing. If expectations for a rate reduction strengthen, for instance, fixed rates could start to decline.

 

Related guide: UK base rate explained - and how to respond to changes

 

After the Governor of the Bank of England, Andrew Bailey, last month reportedly said there could be as many as four base rate reductions in 2025, it may therefore be crucial savers act fast to secure competitive fixed returns.

And, with latest figures from the Office for National Statistics (ONS) finding UK inflation eased to 2.5% in the year to December 2024, many economists are anticipating the next cut could be imminent.

 

Compare the best savings rates

Our savings charts are regularly updated throughout the day to bring you the best fixed, easy access and notice rates currently on the market.

Those looking to make the most of their tax-free savings allowance before the 2024/25 tax-year ends in a few months’ time can also use our charts to compare the best ISA rates.

Alternatively, for more information on market-leading accounts, be sure to read our weekly savings and ISA roundups.

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfactscompare.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.

Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.