Fixed savings rates at lowest levels in over a year

As providers continue to make cuts, fixed savings and ISA rates see another monthly fall.

Average rates on one-year bonds and one-year ISAs have dropped to their lowest levels since June 2023, according to data from the latest Moneyfacts UK Savings Trends Treasury Report.

As of 1 October, the average one-year bond stood at 4.31%, down from 4.43% at the start of September, while the average one-year ISA fell to 4.18% compared to 4.29% one month earlier.

Rates on longer-term bonds and ISAs (accounts with terms over 550 days) also dropped month-on-month, although not as much as their one-year counterparts.

The average longer-term bond fell from 3.99% to 3.93%, the lowest it has been since April 2023.

Meanwhile, the average longer-term ISA rate dropped from 3.92% to 3.88% between September and October to reach its lowest point since March 2023.

“Savers looking to secure a guaranteed return may be disappointed to see average fixed rates on bonds and cash ISAs drop to their lowest levels in over a year,” noted Rachel Springall, Finance Expert at Moneyfacts.

“However, the margins of cuts month-on-month across one-year and longer-term fixed bond and ISA average rates were lower than the previous month,” she pointed out.

Easy access rates hold steady

While fixed rates continued to decline, easy access accounts remained more stable with the average easy access savings rate staying at 3.07% in the month to October, for example.

However, because easy access rates have fallen in previous months, this is still notably lower than the average of 3.16% from one year ago.

When it comes to easy access ISAs, the average rate dropped by just 0.01 percentage points to 3.28% in October. Encouragingly for savers, this is slightly higher than October 2023 when the average rate was 3.24%.

By contrast, fixed-rate bonds and ISAs have seen much more significant falls year-on-year as average rates are more than one percentage point lower than last October.

For example, the average rates on one-year fixed bonds and ISAs were 5.42% and 5.27% respectively one year ago, which means any savers who locked into one of these products will find that rates are now much lower than when they opened their account.

What next for savings rates?

With inflation falling to 1.7% in September, it’s still possible to find many accounts that offer a competitive, inflation-beating return on your money.

However, especially now inflation is below its target of 2%, experts are predicting that the Bank of England will cut the base rate at least once before the end of the year which could cause savings rates to fall even further.

Moreover, Springall added that “providers will no doubt be assessing their market positions over the coming weeks and will be eyeing up the upcoming Budget to see how this may impact future rate expectations”.

But, despite the downwards trend of rates and the potential uncertainty for the savings and ISA market, it’s not all bad news for savers.

Anyone wanting to move their money into a better-paying account to take advantage of the current rates still has plenty of options to choose from as the number of savings and ISA accounts on the market rose to 2,015 in October.

This includes 1,460 savings accounts and 555 ISAs.