Fixed savings rates plummet despite rise in providers

All average fixed savings and ISA rates fell month-on-month for the first time in six months.

Nearly all average savings and ISA rates fell in the month to May, with only the average easy access savings rate bucking the trend and seeing a slight uptick. This is according to the latest Moneyfacts UK Savings Trends Treasury Report which analyses data from the savings market each month.

Longer-term fixed bonds (accounts with terms over 550 days) saw particularly significant declines between April and May, despite edging above 4% in the previous month.

The average longer-term bond fell from 4.02% in April to 3.94% in May, while average rates on longer-term fixed ISAs saw an even bigger drop from 4.01% to 3.87% over the same period. These were the largest monthly falls recorded for these accounts since September 2024.

The rise and subsequent decline in longer-term savings rates “demonstrates the volatility in future rate expectations”, noted Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, adding that rates are “expected to fall even further due to the recent cut to the Bank of England base rate”.

One-year bonds and one-year ISAs weren’t left unscathed as they too saw average rates fall between April and May. The average one-year bond dropped from 4.19% to 4.11% as the average one-year ISA fell by 0.10 percentage points to reach 4.02% at the start of the month.

Is a fixed account still worth it?

Unlike fixed accounts, the average easy access savings rate edged higher from 2.76% in April to 2.78% in May.

However, Springall points out that “any calls for celebration are unlikely to last due to the base rate cut”, which is expected to cause further rate drops across the savings market.

Savers with money in a variable rate account will be particularly at the mercy of falling rates as providers can change the interest they pay at relatively short notice.

With this in mind, savers can temporarily ensure their money is protected from any drops in rates by locking it away into a fixed bond or fixed ISA. Even though these accounts offer lower rates than they have done previously, they can still give savers peace of mind that they’ll receive a guaranteed interest rate for a specified period, regardless of what happens in the savings market.

It’s important to make sure you only put away money in a fixed bond or ISA that you don’t need to access for the length of the term.

Building up a savings pot

Fixed rate accounts may be appealing for some savers, but they won’t be right for everyone.

Even though easy access accounts are vulnerable to drops in interest rates, these types of accounts are still useful for storing an emergency fund that savers can dip into when needed, as well as being a simple option for those wanting to build up a savings pot.

Concerningly, the recent Financial Lives survey from the Financial Conduct Authority (FCA) found that one in 10 people had no money in cash savings, while 21% had less than £1,000 saved up. For these individuals, easy access accounts can be a good way to start growing their savings.

“Easy access accounts remain a firm favourite among savers, and encouragingly for them, they will find challenger banks are particularly active in this space, which now includes some new arrivals, such as Spring, part of Paragon Bank,” Springall commented.

As a result, the number of savings providers available rose to 152 in May, the highest count on Moneyfacts’ records.

And, for those wanting to take out an ISA, the number of ISAs on the market also increased to a record high of 616.

With such a wide choice of savings and ISAs on offer, savers should be able to find an account that suits their requirements. Whether they need access to their savings, have a small or large sum already saved up or want to manage their money in a particular way, there are different accounts available to cater to different situations.