Fixed bond and ISA rates drop considerably across spectrum

South Wales Guardian

21-05-2025

Rachel Springall, Finance Expert at Moneyfacts, said: 'Savers will be disappointed to see all fixed rates fall across the spectrum month-on-month, which has not occurred for six months.
"The reduction in the average longer-term fixed bond and ISA rates noted the most significant falls for over six months, and is a disheartening turn of events after they rose above 4% at the start of April.
BBC reporting that Chancellor Reeves has ruled out reducing the £20,000 annual limit on money being paid into a cash ISA. So those with lots of £20,000s waiting to go to tax free savings can schedule annual payments! Find best deal and fix for a year if you can (currently 4.27%)
"This demonstrates the volatility in future rate expectations, with rates expected to fall even further due to the recent cut to the Bank of England base rate. Those savers who prefer to lock into a short-term fixed deal will find the average one-year fixed bond rate fell by the biggest margin since October 2024 and that the rate has fallen by 0.47% year-on-year.
"The volatility surrounding the shelf-life of a fixed-rate bond has escalated, falling to 36 days, down from 46 a month prior. Despite a fall in rates, fixed bonds and ISAs will still appeal to savers who want a guaranteed return on their investment.
'Those savers looking for a flexible pot for their cash will find the average return on an easy access account rose to 2.78%, but any calls for celebration are unlikely to last due to the base rate cut.
"Easy access accounts remain a firm favourite among savers, and encouragingly for them, they will find challenger banks are particularly active in this space, which now includes some new arrivals, such as Spring, part of Paragon Bank.
"The total number of providers rose as a result, to a new record high. Savers looking to protect their hard-earned cash from tax may be pleased to see a widening in the pool of cash ISAs, where there are now 616 options, a new record high.
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'There was a notable mad dash of providers improving rates to draw in deposits before the end of the 2024/25 tax year. However, as may be expected, cash ISA rates have since fallen, but savers would be wise to take advantage of their ISA allowance regardless of any rate volatility in the months to come.
"Cash ISAs will no doubt be popular as millions of people are expected to pay higher-rate tax at 40% this tax year, which will see their £1,000 Personal Savings Allowance (PSA) effectively halve to £500 as a result.
"Savers must make every effort to review their pots and shop around for a better deal as providers jobs" target="_blank">work hard to entice new business.'