Fixed Interest Rate Bond Rises Fuel Recovery in UK Savings Market

By: MoneyFacts

The latest data from moneyfacts.co.uk reveals that the savings market has now had six consecutive months wherein rate rises have outweighed cuts, with June seeing 125 rises versus 21 cuts.

Fixed rate bonds have been playing a huge part in the recovery of the market since the start of 2017, with last month showing that 78% of the recorded rate rises were for fixed rate bonds.

As we hurdle past the halfway point of the year, there is growing evidence that fixed rate bonds are the largest sector of the market which consistently raises its rates. Even though these rises have mainly been by small amounts each time and spread across the weeks, it still means that savers would be wise to review the current Best Buys, as they could be able to find a better deal.

Despite this good news, statistics released today show that the Consumer Prices Index (CPI) fell to 2.6% during June, so as it stands, there is still not one standard savings account on the market* that can outpace inflation.

Rachel Springall, Finance Expert at moneyfacts.co.uk, said: “It’s encouraging to have seen some slight recovery in the cash savings market for every month so far this year, but clearly there is still room for improvement. While some may think it’s only positive that fixed rate bonds are fuelling the market’s recovery, not every saver will want to lock in their cash.

“Higher inflation is a cause for concern because as it stands it’s highly unlikely that a cash savings product will be able to outpace inflation erosion. This could turn some savers to more riskier products for the chance of more appealing returns, but this is a hazardous choice without proper guidance.

“The most lucrative month so far this year has been March, when we recorded a staggering 163 rate rises, and it’s promising to still see rises outweigh cuts as we pass the half-year point. It’s also a positive sign that the number of rises seen last month are superior to those seen at this time last year.

“While there have been murmurings of a base rate rise, this is looking less likely to appear over the shorter-term. Thankfully, the cash market has been improving regardless, even if just slightly, thanks to challenger banks repeatedly leap-frogging their competition by making consecutive improvements to their range, particularly on fixed rate bonds.”

*Data Note: Please note that these savings product numbers only include deals that are available to all UK residents (this figure does not count each interest payment option for each account). Moneyfacts has chosen not to include products that have limited access, such as locals-only, high net-worth clients or linked products which mean you must have an existing account to obtain headline rates. Moneyfacts has taken the view that as these accounts are not available to your entire readership, their inclusion may be misleading to your readers by directing them to accounts they may not be entitled to. We do, of course, hold all this data should you require it. Our daily Moneyfacts savings rate monitoring started in July 2015 and is a record of live standard savings account changes, which include fixed rate bonds of all terms, all ISAs, notice accounts and no notice accounts.

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