Fixed rate savings rates have jumped recently, but with interest rates widely expected to rise again next week and in months to come, savers may be wondering whether to fix now or wait for higher returns.


Households deposited £2.8 billion into fixed rate saving accounts in July according to the latest Money and Credit report from the Bank of England (BoE), the highest amount paid into these accounts since 2010. In contrast, only £700 million was paid into variable saving accounts in the same month.

At the time of writing, the top one-year fixed rate bond, which is from United Trust Bank and can be opened with a minimum investment of £5,000, paid an impressive 3.35% annual interest before tax, nearly double the Bank of England base rate which currently stands at 1.75%. High returns are also available to those saving smaller sums, with Virgin Money’s one-year fixed rate e-bond paying 3.32% annual interest on a minimum investment of £1. The top easy access accounts typically pay much lower returns of around 2%.

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Find out more about accounts – including a SIPP, Stocks and shares ISA, Lifetime ISA, junior accounts.

If you’re prepared to tie up your savings for longer than a year, then even higher returns are available. For example, Secure Trust’s five-year fixed rate bond pays 3.60% on a minimum investment of £1,000, with United Trust Bank paying 3.54% on a £5,000 minimum balance.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “There has been a flood of cash into fixed rate savings. Savers know that inflation is here to stay, and that if they leave their money in easy access accounts, its spending power is going to be washed down the drain by inflation. It means canny savers have powered a steady flow into fixed rate savings accounts.”

Pros and cons of fixing now

Fixed rate savings accounts tend to pay higher returns than easy access accounts because you’re usually required to tie your money up for a set term, typically between one and five years. If you’re considering this type of account, you must therefore be certain that you won’t need to dip into your savings in the next few months to help cover rising living costs.

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Whilst it might be tempting to put your savings into a fixed rate savings account now, it may be worth holding fire at least until the next interest rate decision next Thursday. Some commentators are predicting that the base rate could rise by another half percentage point this month, which would likely see fixed savings rates rise too, and markets anticipate that it could reach as high as 4.25% by August 2023.

Anna Bowes, founder of savings website, said: “With things changing all the time, there is always the concern that if you lock into a fixed rate bond today, you might be missing out on better rates tomorrow. And that is a risk you may have to take. If you are always waiting to see if something better might come along, while leaving your cash to languish in a poorer paying account in the meantime, then you will always be missing out on earning that little bit more.


“One option, to try and hedge your bets, is to split your cash - putting some into fixed term, higher paying accounts now and keeping some aside in an accessible but best paying account to take advantage of the opportunity of higher rates if they come along.”

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