• The average one-year fixed bond rate at 4.04% gross is now 0.13% higher than the average five-year fixed bond at 3.91%. The rate gap was 0.11% a month prior.
• In January 2025, the rate gap between the average one- and five-year bonds was 0.33%, as they sat at 4.19% and 3.86%, respectively.
• A year ago, the average one-year bond paid 4.64%, while the average five-year bond paid 3.98%, a rate gap of 0.66%.

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

“The top one-year bond has seen its largest month-on-month increase in almost a year. Generally, this sector of the market is more competitive as they are a good way for challenger banks to test savers’ appetites and fund their future lending. Despite short-term rates improving, investors continue to be incentivised to lock away their cash for longer as they can receive greater returns. The same drive is lacking among providers to improve their rates as the top four- and five- year fixed bonds have failed to improve for the third consecutive month, but this may be attributed to uncertainty surrounding interest rates over the long-term.

“Savers coming out of the market-leading bond from July 2023 will be disheartened to see that rates have dropped by almost 2%, which equates to a £347 loss if they re-invested £10,000. To add insult to injury, initially inflation would have eroded all of savers’ returns, leaving them worse off in real terms. Even two years on, after inflation, investors are left with just over 1%.

“An estimated 7.08 million taxpayers are expected to be in the higher income tax bracket, with a further 1.23 million projected to be in the additional rate tax bracket during the 2025-2026 tax year. As a result, many savers – especially those with larger deposits – could be hit with an unexpected tax bill as they find that their Personal Savings Allowance (PSA) has been halved or removed entirely.”