Rachel Springall, Finance Expert at Moneyfacts, said:
“The growth in product choice for savers has reached a milestone, as the market’s steady recovery has led to volumes reaching the highest point not seen since before the UK lockdown and Bank of England base rate cuts in March 2020. The past six consecutive months of product choice growth has been fuelled mostly by a rise in fixed bond and notice account options, and rates have also improved in these areas. Savings providers have been attentive with pricing fixed bonds, and the average longer-term bond has now surpassed 1% for the first time since June 2020.
“A notable uplift was seen in the one-year fixed bond arena, where the average rate rose by 0.09% month-on-month, the biggest rise since April 2011. Standing at 0.76%, it is the highest rate since last June. Savers looking to lock their cash away for a year may also be considering an ISA to take advantage of their tax-free wrapper, but the same uplift to rate has not emerged. Indeed, we have recorded the biggest margin between the one-year fixed bond and ISA average since September 2012, so savers will receive 0.23% less from a one-year fixed ISA than a fixed bond equivalent on average. Since the start of April 2021, the average one-year fixed bond rate has improved by 0.34%, compared to the ISA equivalent which has risen by just 0.17%, half the level of recovery of the bond rate.
“Savers considering their options in light of the interest rate rises on fixed bonds may well be moving their cash around to take advantage. According to the Bank of England, during August there was an outflow of £213 million from cash ISAs, bringing the total outflow so far during 2021 to £2.6 billion. However, those who desire flexibility with their cash continue to pour into easy access accounts, where an inflow into sight deposits of almost £9 billion occurred, which is just over £80 billion so far during 2021. Such flexibility does come at cost in interest earned however, as unlike other savings vehicles which have improved, after minor dips and rises this year the average easy access rate currently stands at 0.18%, matching that seen in January. Considering this, picking the right savings account for any circumstance is vital, and a re-think may be in order on how often someone needs access to their cash to acquire a more competitive rate of interest.”
Rachel Springall, Finance Expert at Moneyfacts, said:
“The growth in product choice for savers has reached a milestone, as the market’s steady recovery has led to volumes reaching the highest point not seen since before the UK lockdown and Bank of England base rate cuts in March 2020. The past six consecutive months of product choice growth has been fuelled mostly by a rise in fixed bond and notice account options, and rates have also improved in these areas. Savings providers have been attentive with pricing fixed bonds, and the average longer-term bond has now surpassed 1% for the first time since June 2020.
“A notable uplift was seen in the one-year fixed bond arena, where the average rate rose by 0.09% month-on-month, the biggest rise since April 2011. Standing at 0.76%, it is the highest rate since last June. Savers looking to lock their cash away for a year may also be considering an ISA to take advantage of their tax-free wrapper, but the same uplift to rate has not emerged. Indeed, we have recorded the biggest margin between the one-year fixed bond and ISA average since September 2012, so savers will receive 0.23% less from a one-year fixed ISA than a fixed bond equivalent on average. Since the start of April 2021, the average one-year fixed bond rate has improved by 0.34%, compared to the ISA equivalent which has risen by just 0.17%, half the level of recovery of the bond rate.
“Savers considering their options in light of the interest rate rises on fixed bonds may well be moving their cash around to take advantage. According to the Bank of England, during August there was an outflow of £213 million from cash ISAs, bringing the total outflow so far during 2021 to £2.6 billion. However, those who desire flexibility with their cash continue to pour into easy access accounts, where an inflow into sight deposits of almost £9 billion occurred, which is just over £80 billion so far during 2021. Such flexibility does come at cost in interest earned however, as unlike other savings vehicles which have improved, after minor dips and rises this year the average easy access rate currently stands at 0.18%, matching that seen in January. Considering this, picking the right savings account for any circumstance is vital, and a re-think may be in order on how often someone needs access to their cash to acquire a more competitive rate of interest.”
