Rachel Springall, Finance Expert at Moneyfacts, said:

“The savings market appears to have entered a period of stability, a notable contrast from recent months of volatility. The average one-year fixed bond rate remained unchanged for the first time in a year (January 2022) and the average shelf life of fixed accounts overall rose by two days to 29 days. During the same period, all average variable rates rose, which includes variable rate cash ISAs. Fixed savings providers adjusted their market positions, and for the first time in almost two years, the longer-term average rates across fixed bonds and ISAs fell. These movements show the change in attitude among providers in the aftermath of the interest rate uncertainties across the last quarter of 2022.

“As the Bank of England moved to increase the base rate in December 2022, it was somewhat inevitable to see a drop in the proportion of savings accounts that pay above base rate (ABR). While the savings market overall has been blessed by interest rate rises during 2022, almost 70% of accounts now pay below base rate (3.50%). The consecutive rises to base rate should spur savers to check their existing savings accounts, particularly as challenger banks and building societies offer some of the best rates on flexible accounts. As the cost of living crisis persists, savers may need to dip into their pots, so easy access and notice accounts could be the most suitable option that offers flexibility.

“The demand for cash to perhaps subsidise the cost of living, and the desire of other savers to secure a fixed return, was evident in recent figures published by the Bank of England. There was an outflow of £1.6 billion from interest-bearing sight deposits in November and demand for fixed accounts recorded an inflow of £10 billion into time deposits. As a new year begins, consumers may be reconsidering their savings habits, so it is vital that providers address these needs and adjust their rates on offer to entice new business.”