Moneyfacts UK Savings Trends Treasury Report data shows the average rate on both longer-term fixed rate bonds and fixed ISAs breached 4% for the first time in over six months. Overall product choice rose to a record high, as did the number of cash ISAs.
Rachel Springall, Finance Expert at Moneyfacts, said:
“Savers who are debating whether to lock into a fixed rate bond or ISA over the longer-term may find it encouraging to see average returns have breached 4% for the first time in over six months. Providers were keen to reprice their fixed bonds during March, and this volatility was shown in the average shelf-life of a fixed rate bond, which dipped to 46 days down from 66 days a month prior. The incentive to fix for longer is also improving, as the rate gap between the average one-year and longer-term fixed bonds has condensed to its lowest margin since July 2023. The last time the one-year average rate was below the longer-term average rate was back in June 2023, suggesting that the inversion in rates that we have seen could soon come to an end.
“As the end of the tax-year neared, there was notable competition among providers tweaking their fixed rate cash ISA rates, which led to a rise in both the average longer-term and one-year fixed rates. There was also a slight increase to the average easy access cash ISA rate. However, cash ISAs have been known to drop after the end of tax-year deposit rush fizzles out, so savers should make it best practice to leave plenty of time to acquire a new deal and take full advantage of their yearly ISA allowance. Cash ISAs continue to thrive in choice, with the number of deals reaching a record high, and these continue to be popular as, according to the Bank of England, in February alone, £3.5bn was ploughed into cash ISAs. There will be many consumers expected to pay higher-rate tax at 40% this tax-year, around 2.5 million in fact, according to the Office for Budget Responsibility (OBR), so it’s not too surprising to see such healthy deposits made into cash ISAs.
“Easy access accounts remain a firm favourite among savers due to their flexibility, but they have been bashed and battered by rate cuts. The month-on-month cut of 0.08% is the biggest monthly fall since December 2024 and demonstrates why savers must regularly check their pots and switch if they are getting a poor return. The rise in the overall number of savings providers and an increase to product choice reinforces why savers must shake indecisiveness and shop around for a better deal. Product choice is now at a record high, and the number of providers is at a joint record high. Providers will need to work hard to entice new deposits, and they will no doubt be watching the markets closely to see how this may impact their future rate pricing.”
