Savers are turning to flat rates as one-year deals soar to their highest level in nearly 10 years with best rates crossing 3%: is now a good time to enact?
- The average one-year fixed bond rose to 1.97% – the highest level since January 2013
- Meanwhile, the average low threshold is currently at 0.7%
- The best one-year deal pays 3.1% compared to 1.9% for easy access
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An increasing number of savers are turning their attention to fixed-term savings agreements as interest rates continue to rise.
The average one-year fixed bond rose to 1.97 percent, according to Moneyfacts, the highest level since January 2013.
Meanwhile, the average low threshold is currently at 0.7 percent, compared to 0.18 percent this time last year.
Fixed-income premium: the best one-year deal pays 1.2 percentage points more than the best low-threshold deal.
According to James Blower, founder of The Savings Guru, the gap between easy access and flat rates has led many savers to settle for the latter.
He has seen a big increase in the number of people looking for fixed rate deals with one-year bills which have proven to be the hottest product on the site for the past five months.
The best one-year deal on the market, currently offered by QIB (UK) pays 3.1 percent.*
Someone who deposits £10,000 in this account could earn £310 in interest over the course of the year.
According to The Savings Guru, there were three times as many searches as the one-year rate in August compared to easily accessible accounts.
As more than half of savings in the UK are in easily accessible accounts, this indicates a momentum shift.
The best low-threshold savings deal on the market pays 1.9 percent, while the best one-year fixed-income deal currently pays 3.1 percent.
Some savers may want to lock up for longer. However, they may be disappointed by the fact that a longer maturity yields little benefit in terms of interest rates.
For example, the difference between the best one-year and a five-year deal is only 0.45 percent.
James Blower says, “There isn’t enough to warrant a longer incarceration at this point. I think if you’re a saver who wants to lock up, a year is a good compromise.
‘The rates are 1.2 percent higher than the best easy access rate, so there is a considerable extra premium for taking out.
“However, it also gives you a chance to look again in 12 months to see when we expect interest rates to be higher – so it’s a good compromise where you get a good rate now and potentially a much better long-term rate in a year.
“While holding for the long term now, savers can look back and wish they had waited.”
How to take the best flat rates even further?
The savings platform, Raisin, is currently home to both the best one-year deal with a fixed rate of 3.1 percent and the best five-year deal with a payment of 2.55 percent.
It is also home to the best three-year deal that pays 2.4 percent – also offered by Tandem Bank.
Raisin is currently offering This is Money readers the chance to earn an extra £25 when they sign up and deposit £10,000 into one of his savings deals.
This could essentially mean that someone who deposits £10,000 into the 3.1 percent one-year deal could essentially raise their rate to 3.35 percent, including £25.
To take advantage of the £25 welcome bonus, savers must: sign up via this link.*
As a savings platform, Raisin brings together a large number of savings providers under one roof.
So savers can manage all their savings accounts in one place and reduce the bureaucracy involved in transferring money between accounts.
While Raisin isn’t the whole market, it tends to offer some of the most competitive rates.
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