• The average one-year fixed bond at 4.19% gross is now 0.33% higher than the top five-year fixed bond at 3.86%. The rate gap was 0.36% a month prior.
• In July 2024, the rate gap between the average one- and five-year bonds was 0.66%, as they sat at 4.64% and 3.98%, respectively.
• A year ago, the average one-year bond paid 4.87%, while the average five-year bond paid 4.20%, a gap of 0.67%.

Caitlyn Eastell, Spokesperson at Moneyfactscompare.co.uk, said:

“Savers who are expecting their two-year fixed bond to mature this year will see that the top returns are not too dissimilar today, which could sway investors to lock in for a shorter one-year term if they are concerned about inflationary pressures. Although shorter-term fixed bonds currently pay higher rates than their longer-term counterparts, there are expectations for base rate cuts this year. Reductions to the Bank of England base rate typically impact variable rates in the first instance but may also influence providers pricing for fixed rate products. Therefore, savers could feel it’s wiser to fix for longer.

“Savers missed out on a rise to the Personal Savings Allowance (PSA) during Labour’s first Autumn Statement in October 2024, so they may well be feeling the pressure. However, consumers should be cautious of their initial investment amounts to avoid potentially breaching the PSA. In any case, investors may wish to seek independent professional advice before locking away their cash and carefully consider the terms and conditions of a fixed rate deal.”