Moneyfacts UK: Variable savings rates drop to lowest levels since 2023

Moneyfacts UK Savings Trends Treasury Report data shows variable savings rates fell to their lowest levels since August 2023 month-on-month, covering easy access, notice accounts and their cash ISA counterparts.

• Product choice overall fell month-on-month to 2,146 savings deals (including ISAs), the second highest count on our records (starting February 2007). The choice of cash ISAs, however, rose to 598 deals, a new record high. The number of savings providers fell to 150, down from 151 last month, the second highest count on our records.
• The average easy access rate fell month-on-month to 2.84%, now at its lowest level since August 2023. The average notice rate fell to 3.84%, also at its lowest level since August 2023. The average notice rate pays 1.00% more than the average easy access rate, the smallest margin since October 2023 (0.99%).
• The average easy access ISA rate fell to 3.02%, now at its lowest level since August 2023. The average notice ISA rate fell to 3.79%, which is 0.77% more than the average easy access ISA rate, and is also at its lowest level since August 2023.
• The average one-year fixed bond rate fell to 4.15%, now at its lowest since May 2023. The average longer-term fixed bond fell to 3.96%. The difference in rate between the average one-year and longer-term fixed bond stands at 0.19%, the smallest gap since August 2023. The average one-year fixed bond has now been higher than the longer-term fixed bond since July 2023.
• The average one-year fixed ISA rate fell to 4.07%. The average longer-term fixed ISA rose to 3.95%, the highest since August 2024. The difference in rate between the average one-year and longer-term fixed ISAs is now 0.12%, the smallest rate gap since August 2023.

Rachel Springall, Finance Expert at Moneyfacts, said:

“Variable savings rates across the savings spectrum have become an inevitable casualty of the Bank of England’s base rate cuts. As savings providers cut rates across easy access accounts, notice accounts and their equivalent cash ISAs, it has resulted in the lowest recorded average variable rates since August 2023. Easy access accounts remain a staple for many savers due to their flexibility, but the cuts may encourage some to consider a fixed rate deal for a guaranteed return over the coming years. Fixed rate bond rates are still on the downward trend, but the margins of falls are not as aggressive as seen in previous months. This may then be an encouraging sign, particularly as the average shelf-life of a fixed rate bond rose to 66 days, up from 48 a month prior, and is the lengthiest term in three years (March 2022 – 74 days).

“Cash ISAs continue to thrive, with the pool of products rising for a consecutive month, now standing at a record high of 598 deals. Despite the rise in choice this ISA season, cash ISAs have not been immune to rate cuts, but the longer-term fixed cash ISA rate managed to rise, albeit slightly, month-on-month. Savers taking out a one-year fixed cash ISA will find they are earning 0.42% less than they did in March 2024. Cash ISAs are still very much a popular choice for their tax-free benefits, especially for the millions of consumers expected to become higher rate taxpayers, when they will see their Personal Savings Allowance (PSA) halved. According to the Office for Budget Responsibility (OBR), it is estimated that 2.5 million people are expected to pay higher-rate tax at 40% (2025-26). According to the Bank of England, in January alone, £2.2bn was ploughed into cash ISAs.

“The proportion of accounts across the savings spectrum which can beat the Bank of England base rate (4.50%) rests below 5%, and so there will also be pots out there eroded by inflation. The incentive to review and switch accounts is essential for savers and it is worth noting that £300bn is sitting in UK current or savings accounts earning no interest whatsoever, according to the Bank of England. It is imperative savers take action to consider all the various accounts available to them, maximise the interest they earn and utilise any tax-free allowances before the end of the 2024/25 tax-year.”