Top short-term fixed bond interest rates are on the rise, with some savings accounts offering returns of up to 5.25 percent.
As of July 4, 2024, the top one-year fixed bond at 5.25 percent gross is now 0.65 percent higher than the top five-year fixed bond at 4.6 percent. Month-on-month, the top one-year fixed bond rate is higher.
In January 2024, Moneyfactscompare’s research shows the rate gap between the top one- and five-year bonds was 0.75 percent, with rates at 5.5 percent and 4.75 percent, respectively.
A year ago, the top one-year bond paid 6.02 percent, while the average five-year bond paid 5.7 percent, a gap of 0.32 percent.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, commented: “The rise and falls of fixed bond rates have been evident over the past couple of years, making it a challenging environment for savers unsure whether to lock their cash into a deal or for how long.
“The top rates are largely offered by challenger banks who strive to draw in deposits to fund their future lending.
“Such competition and brand variety make it an interesting space for consumers comparing deals, but this also means savers need to be quick off the mark to secure a top rate before institutions meet their deposit targets.”
However, Ms Springall noted: “Just because the top rates move, does not necessarily mean the whole market is moving in a similar trajectory, so savers need to compare deals carefully.”
Since the start of 2024, the top fixed bond rates have fallen and are significantly lower than they were a year ago, but this should not deter savers from taking advantage of the rates currently available, Ms Springall noted.
She added: “There are expectations for interest rates to fall in the coming months and that could impact fixed bond rates, so securing a deal now may be wise.”
Best fixed-rate savings accounts today
Topping the table for one-year fixed-rate savings accounts is Mizrahi Tefahot Bank Ltd, offered through Raisin UK, offering an Annual Equivalent Rate (AER) of 5.25 percent. The account can be opened with a minimum deposit of £1,000 and interest is paid on maturity. Up to £85,000 can be invested overall and withdrawals are not allowed until the term ends.
For two-year fixes, Close Brothers Savings takes the top spot with an AER of 5.06 percent. A minimum deposit of £10,000 is required to open the account, interest is paid yearly, and withdrawals are not permitted until the account matures. Up to £2million can be invested overall.
United Trust Bank is offering the top rate for three-year fixes with an AER of 4.81 percent. The account can be launched with a minimum deposit of £5,000, up to £1 million can be invested overall, and interest is paid on the anniversary of opening. Withdrawals are not permitted until the term ends.
United Trust Bank also tops the list of four and five-year fixes with AERs of 4.35 percent and 4.6 percent. The accounts can be opened with a minimum deposit of £5,000 and up to £1 million can be invested overall. Interest is paid on the anniversary and withdrawals are not permitted until the term ends.
Ms Springall continued: “Month-on-month the top one- and two-year fixed bond rates are up, while longer-term versions have remained steady.
“Fixed rate bonds are an ideal choice for savers looking for a guaranteed return on their investment, whether that be for a year or more.
“However, not every saver may be prepared to lock away their cash over the longer term. It will be interesting to see how rates will fluctuate in the coming months.”
