• All average fixed bond rates dropped month-on-month, with the one-year falling the most.
• The average one-year fixed bond at 4.43% gross is now 0.63% higher than the top five-year fixed bond at 3.80%. The rate gap was 0.71% a month prior.
• In March 2024, the rate gap between the average one- and five-year bonds was 0.67%, as they sat at 4.61% and 3.94%, respectively.
• A year ago, the average one-year bond paid 5.35%, with the average five-year bond paying 4.86%, a gap of 0.49%.

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:

“Fixed bond rates took a turn for the worse during August and the pool of bonds paying 5% or more continues to dwindle. It is entirely plausible that providers may drop rates further in the weeks ahead, but the challenger banks are holding firm in the top rate tables. Those challenger banks will have their own deposit targets to meet so that they can comfortably fund their future lending. Therefore, some could break against the rate-cutting trend to entice new business, but the deals may not be on the shelf for long. However, fixed bonds can face notable cuts or even be withdrawn from sale if providers get inundated with deposits from savers rushing to secure a top rate deal, fearing rates are doomed to fall further still.

“It has now been a month since the Bank of England base rate cut, which was the first drop in over four years. Any cuts to base rate can typically impact variable savings rates, but providers will also review rates on accounts that guarantee returns. Unsurprisingly then, fixed bond rates from one-year, up to and including five-year terms, have dropped month-on-month. It is also worth noting that time is a key factor in the flow of cuts within the savings market, and each institution will no doubt be monitoring their peers’ moves in the coming weeks. Those savers who are prepared to lock their cash away for a guaranteed return may be wise to act with pace to secure a 5% bond.”