Rachel Springall, Finance Expert at Moneyfacts, said:

“The significant cuts seen across fixed rate bond and fixed ISA rates month-on-month are the biggest recorded in almost 15 years. This will no doubt come as a shock for savers who use these accounts to earn a guaranteed return on their hard-earned cash and have waited a couple of months to invest. However, despite these falls, it is worth noting that average rates are higher than they were at the start of 2023, so many coming off a fixed rate will find better returns today if they want to lock into a deal of a similar term. Longer-term fixed rates are currently returning less than one-year options on average, but with interest rates expected to fall this year, some savers may decide to fix for longer.

“Savers who prefer to keep their cash closer to hand will find easy access variable rates are much higher now than they were a year ago, but returns have dipped slightly month-on-month. Savings providers will no doubt be aware of the ongoing murmurings of the Bank of England base rate coming down in 2024, but even if this doesn’t occur for the next few months, variable rates can still change. Providers will be looking closely both at their interest margins, the swap market, and their own position in the top rate tables against their peers. Swift movement can take place if they are sitting way ahead of their competition or if they are drawing in too much in deposits.

“Product choice has taken a hit month-on-month, but this should not deter savers from shopping around. As we start a new year it is the perfect time for savers to review their existing pots and switch if they are not being paid a good return for their loyalty. A new ISA season should also bring a flurry of activity from providers and, due to the interest rate rises of 2023 and upcoming ISA reforms, they may be in more demand from savers who are close to breaching their Personal Savings Allowance (PSA). Savers will need to consider all the different account options available to them to suit their short or long-term goals and move swiftly to take advantage of the top rates.”