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Top rates on fixed-rate accounts fall by nearly 25% during base rate freeze

Historic interest rates on fixed accounts prove it’s not a waiting game for savers.

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Savers shouldn’t wait for higher interest, as every month we are seeing providers dropping their rates.

The savings account market has kept us busy in recent months. 

The Bank of England’s base rate may have remained at 5.25% since August, but that doesn’t mean rates on savings accounts are stable. 

This assumption stems from the reasoning banks change their rates as a direct result of the base rate. And, although it certainly influences the decision, it’s not the only reason. Banks also take into account other providers’ rates and their own internal targets for new customers. For example, if they’ve already hit their target the provider may pull the deal or drop the interest rate. 

The best savings account to illustrate this story is the fixed-rate bond. Back in August 2023, the top interest rate for a one-year fixed-rate bond was 6.2% and this stuck around for a few months. 

However, rates started to fall - slowly at first - with the top rate at 6% in November and by January the top rate for a one-year fixed-rate bond dropped quickly to 5.31%. The trend continued in February as the top rate recorded was 5.26% - nearly one percentage point below the peak in August. This means the best interest rate on a one-year fixed-rate bond decreased by 15% during these months, and still the base rate remained unchanged.

Top interest rate for fixed-rate bonds over time

The top interest rate per term from August 2023 to February 2024 - data from Deqfato and Money.co.uk. These rates exclude deals for existing customers, any area restrictions and children's savings accounts.

The biggest percentage drop we’ve seen comes from a three-year fixed-rate bond. This savings account had an interest rate of 6.09% in August but it dropped to 4.64% in February, which is a 24% decrease in interest. 

This illustrates savers shouldn’t wait for better interest rates, as every month we are seeing providers dropping their rates. This could be because of inflation, as although the base rate has remained at 5.25%, we’ve seen inflation fall to 3.4%. 

This provides some good news for savers, as although interest rates are lower than in August last year, there are still plenty of deals available above inflation. This gives savers’ money more purchasing power, so there is no reason to leave money sitting in an account earning little to no interest. 

Currently, the top interest rate for a one-year fixed-rate bond is from Beehive Money at 5.18% - albeit still lower than the top rate in February. This can be opened with £500 and application is via online or mobile banking. Beehive Money also has the top interest rate for a two-year fixed-rate bond at 5.07%. 

Alternatively, the top interest rate for a three-year fixed-rate bond is from Atom Bank at 4.70%. Savers only need £50 to open this account and application is via Atom’s app. For those that want to lock away their money for longer, Close Brothers has a five-year fixed-rate bond at 4.55%, but you’ll need £10,000 as the minimum opening balance. 

Plus, although we’ve seen interest rates fall on fixed-rate accounts, don’t forget about easy access accounts. These rates still remain competitive, so savers should explore all the options available. The Post Office is currently offering savers an easy access account at 5.06% and this includes a bonus rate of 3.51% for the first 12 months. 

Mark your calendar as when the term ends so will this competitive interest rate - you’ll then need to compare all savings accounts to find the best deal in 2025 and beyond.

Maximise the value of your savings by hunting down the best rates available

About Lucinda O'Brien

As a trained journalist, Lucinda has spent the past 10 years writing and editing content for regional and national titles, including The Mirror, WalesOnline and Manchester Evening News. She is now a personal finance editor and specialises in savings, helping people to make confident financial decisions so they can save for what matters most.

View Lucinda O'Brien's full biography here or visit the money.co.uk press centre for our latest news.