- £258bn held in fixed-rate savings accounts at end of week commencing 28 August, up from £130bn last year
- Non-ISA variants record steepest increase – up 122%
- Greatest switch to fix trend seen in ISA market – fixed-rate ISAs now account for 49% of ISA balances
The amount of money held in fixed-rate savings accounts has nearly doubled over the past year as savers responded to rising interest rates, Paragon Bank analysis has revealed.
Paragon’s analysis of CACI’s weekly data – which compiles cash savings account data from 26 providers – showed that £258 billion was held in fixed-rate accounts as at week commencing 28 August 2023, up from £130 billion at the same point last year – a 98% increase.
Fixed-rate non-ISA accounts experienced the greatest percentage increase, rising by 122% from £53.6 billion to £119.1 billion over the period. Fixed-rate ISA balances rose from £76.5 billion to £138.8 billion over the 12 months, an 81.5% increase.
Conversely, the amount of savings held in instant access variants fell during the period by 9.1% overall, with ISA instant access account balances 16.8% lower at the period end at £137.2 billion, and non-ISA accounts 6.9% lower at £528.1 billion.
Although total balance growth was recorded in the non-ISA fixed-rate variant, the greatest level of switching activity was seen between fixed-rate and easy-access ISAs. Fixed-rate ISA balances accounted for 49% of total ISA balances at the end of week commencing 28 August 2023, compared to 31% at the same point last year. Easy access ISA balances fell from 66% of the total to 49% this year.
The switch was less pronounced in the non-ISA market – non-ISA easy access balances accounted for 89% of the total at the end of week commencing 29 August 2022, compared to 79% this year. Non-ISA fixed rate balances moved from 8% to 18% over the same period.
Moneyfacts data shows the average fixed-rate 1-year non-ISA account has risen from 2.45% at the end of August 2022 to 5.43% this year. The equivalent ISA variant stood at 5.21% in August 2023, up from 1.85%.
Derek Sprawling, Paragon Bank Director of Savings, said: “The shift in the savings market over the past 12 months has been unprecedented, we have never experienced the amount of switching to fixed-rate variants and new account openings before, particularly in the ISA segment of the market.
“To record a 98% increase in fixed-rate balances overall, and a more than doubling of the amount held in non-ISA fixed-rate variants, will have changed savings habits for years to come. Our experience shows that if savers hold money in a fixed-rate account, that money will typically switch to a new fixed-term on maturity.”