Average rates on some savings accounts hit 5% for first time in nearly 15 years

Savers looking to lock money into cash Isas or bonds lasting for a year or for the longer term will find average rates have risen above 5% for the first time in nearly 15 years, according to a website.

Based on someone having a £5,000 deposit, Moneyfacts found that, by early September, the average one-year bond had a rate of 5.34%, while the average one-year fixed-rate cash Isa paid 5.19%.

The average longer-term fixed-rate Isa paid 5.02%, while the average longer-term fixed-rate bond paid 5.12%.

Longer-term accounts were defined by Moneyfacts as those lasting more than 550 days.

Rachel Springall, a finance expert at Moneyfacts, said: “Savers may be delighted to see average rates reaching levels not seen since 2008.

“The average rates on one-year and longer-term fixed bonds and Isas all stand above 5% for the first time in almost 15 years (since November 2008).

“Due to intensive competition among challenger banks, average fixed-rates have risen for the past six months. This will come as good news to those who may be coming to the end of their fixed bond or Isa, as much higher returns can be found.

“The average one-year fixed bond rate was 2.29% in September 2022; it’s now 5.34% – on a £20,000 lump sum investment, that’s an extra £610 in interest after one year.”

Average easy access account rates and rates on accounts where some notice needs to be given have also hit their highest levels since 2008, Moneyfacts said.

The average easy access account rate rose to 2.95% in September, reaching its highest point since November 2008.

The average notice account rate rose to 4.04%, breaching 4% for the first time since March 2008.

The average easy access Isa rate rose to 3.04% in September to stand at its highest point since December 2008.

The average notice Isa rate rose to 3.89% – its highest point since November 2008.

Ms Springall continued: “Those savers who want flexibility with their cash will find the average easy access rate rose to 2.95%, its highest point since November 2008, when it was 3.63%.

“At the time, the Bank of England base rate was 4.50%; it now stands at 5.25%.

“There is room for improvement and some savers may not be feeling the full benefits of the consecutive base rate rises, nor might they be getting the best possible return if they fail to switch.

“As of the start of this month, fewer than a third of live savings accounts on the market (paid) more than 5.25%.

“Back in November 2008, around 48% of the live market paid more than base rate (4.50%).

“As UK Savings Week (September 18 to 24) begins, it’s a good reminder for savers to review any existing accounts and any personal savings goals.

“Comparing different types of accounts and exploring the more unfamiliar brands is wise, particularly when challenger banks offer some of the most lucrative returns.”

A new consumer duty was recently introduced by the Financial Conduct Authority (FCA), requiring financial firms to put consumers at the heart of what they do.

The regulator has also set out a 14-point action plan to make sure banks and building societies are passing on interest rate rises appropriately to savers, communicating with customers effectively and offering them better deals.

Research released by the Building Societies Association (BSA) on Monday indicated that around a third (34%) of people with savings hold most of this money in a current account. Many current accounts do not pay any interest on the balance.