• The average one-year fixed bond rate at 4.16% gross is now 0.20% higher than the average five-year fixed bond at 3.96%. The rate gap was 0.28% a month prior.
• In September 2024, the rate gap between the average one- and five-year bonds was 0.63%, as they sat at 4.43% and 3.80%, respectively.
• A year ago, the average one-year bond paid 4.61%, while the average five-year bond paid 3.94%, a rate gap of 0.67%.

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

“Savers will be disappointed to see that both short- and long-term market-leading fixed rate bonds have experienced harsh cuts by up to 0.19% over the past month, with the average one-year fixed bond rate seeing a notable drop. Those who are still sitting on the fence about investing their cash in a fixed bond would be wise to make a move soon as rates could tumble further. Despite impacting variable rates in the first instance, the Bank of England base rate cut in February could be partly to blame for fixed rate bond cuts. However, some providers have been adjusting their market positions in both directions, showing there is still a need for deposits to fund their future lending goals. In more positive news, challenger banks continue to dominate the leading positions, leaving savers spoilt for choice if they want to spread their investments across different brands.

“Many economists expect that interest rates will continue to come down this year, and to add insult to injury, inflation is expected to temporarily rise to 3.7% in Q3 2025. Savers locked in for longer and waiting for their fixed bond to mature will need to prepare themselves as they can expect to be left worse off in real terms when they come to re-invest if interest rates continue on the downward path.”