After two years in the spotlight, it looks like fixed rates are well and truly on the way down.
From October to December, the average one-year fixed rate fell from 5.45% to 4.89%. In the same time, one-year Cash ISA rates fell from 3.35% to 2.56%.
Longer term fixes had an even bigger fall. With the average rates for a two-year fixed or above falling way below 5% in December.
However, there are still opportunities for a good deal on your cash, if you’re looking in the right place.
This article isn’t personal advice. If you’re not sure if something is right for you, ask for advice.
What can I do about it?
The trend is likely to keep going downwards, if so there’s nothing to gain from waiting. If the decline does continue, savers keen to lock in 5% rates for one year might only have a few more months, or weeks, to do it.
Fixing now means money will keep getting that rate even if others keep falling.
Just remember, a fall in savings rates is likely – but isn’t guaranteed. You usually can’t withdraw from a fixed rate until the term ends. So, if rates do rise, locking your money up could backfire.
Fixed terms are pretty appealing while the best savings rates are comfortably trumping price rises. However, if your savings rate is lower than inflation, the future spending power of your money will reduce over time.
What about easy-access savings?
Even though fixed rates are falling, easy-access rates are staying high.
You usually get better returns for locking your money away. But the gap between the highest one-year fixed rates and highest easy-access rate right now, sits at just 0.28%.
Everyone should have cash set aside in easy-access accounts for emergencies. So, every saver should be benefitting from these higher easy-access rates.
But the reality is, big banks are still lagging behind, even with government pressure to pass on the better rates.
Moving your money from the average big bank instant access to a competitive easy-access rate could even double your returns. Just remember, withdrawals from easy-access products usually take up to one working day.
Savings rates are moving fast. Make sure you don’t miss out.
Sign up to our Active Savings alerts email and be one of the first to know when new rates are added.
Where can I look for the better savings rates?
When rates are falling, it’s even more important to shop around. Over half of the one-year fixes on offer are already below 5%. And that includes the rates offered by every high street bank.
If you’re not sure where to look, you could start with the smaller banks. Because of their size, they usually need to work harder to attract money, and that means offering better rates to their customers.
Plus, smaller banks offer greater choice for short-term fixes. The products haven’t fallen back dramatically yet, so it could be a good time to consider fixing some money from one to nine months.
But chasing rates from bank to bank is a hassle we can all do without. That’s why we created Active Savings.
You can find and access great rates from our bank and building society partners, all in one easy-to-use online account. Choose rates from a few months to several years. All next to your easily accessible savings.
If you’re looking to secure a Cash ISA rate, you can also look at the HL Cash ISA. You can spread your money across a fixed rate and easy access through one online Cash ISA.
That makes it easy to match your savings to your needs, without paying more tax than you need to. ISA and tax rules can change and their benefits depend on your personal circumstances.
This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.
The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).