• All average fixed bond rates rose month-on-month, with the five-year increasing by 0.07% and the four-year increasing by 0.09%.
• The average one-year fixed bond rate at 4.21% gross is now 0.28% higher than the average five-year fixed bond at 3.93%. The rate gap was 0.33% a month prior.
• In August 2024, the rate gap between the average one- and five-year bonds was 0.71%, as they sat at 4.63% and 3.92%, respectively.
• A year ago, the average one-year bond paid 4.62%, while the average five-year bond paid 3.88%, a rate gap of 0.74%.

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

“Savers will note positive rises across longer-term fixed bonds over the past month, but year-on-year short-term rates have dropped. Savers who invested £10,000 in the top one-year fixed bond a year ago would have earned £516 in interest, however, those expecting their bond to mature this month and considering locking in again for the same term can now expect to earn almost £40 less. At a glance this may seem an insignificant amount, but it shows the harsh cuts fixed rates have experienced over the past year. Base rate cuts by the Bank of England and sticky inflation have also eaten into consumers’ pots. Despite dwindling rates, higher rate taxpayers may still be on course to breach their £500 interest-earned Personal Savings Allowance (PSA), so careful planning is a must. It is widely speculated that more base rate reductions could take place this year, which could pose another blow to savers.

“Challenger banks are paving the way for market-leading returns to entice new business, which is positive news for savers in search of competitive returns. However, some may not wish to place themselves too far ahead of their peers. With the unpredictable nature of markets, providers might be forced to cut rates, so investors might find it more attractive to lock their cash away in a longer-term fixed rate bond for a guaranteed return. In any case, savers who are feeling the pressure should seek independent advice to go over their options and consider any account carefully.”