While interest on fixed-rate savings accounts has been rising throughout the summer, Swaps rates have started to reduce in the last two weeks, which suggests that fixed-term deals “could have reached their peak”, analysts at Paragon Bank have said.
With a surge in savers opting for shorter-term fixed rates, experts warn many may have “missed out” on locking in the highest interest rates seen for 15 years by avoiding three or five-year deals.
Derek Sprawling, savings director at Paragon Bank, said: “Although it’s fantastic that we have seen savers acting and switching their money into fixed-rate accounts, the vast majority of that money is in one and two-year rates.
“With the market expecting interest rates to reduce over the medium term some savers might see value in longer-dated options available, even if the rate is lower than the best one-year rate available.”
He added: “With the Swap rate starting to head downwards on the back of improved inflation data, we could see savings rates start to follow. There is a perception that savers don’t see any return on five-year rates until maturity, but many providers, including Paragon, allow savers to take interest on an annual basis, which they can then reinvest.”
Fixed savings accounts lock in the rate of interest offered at the time of opening, adding a layer of certainty to saving. With ample deals on offer exceeding interest rates of six percent, here are the top three to five-year deals on the market now.
Top three-year fixed savings accounts
Topping the list of three-year savers is Recognise Bank’s Fixed Rate Account (Issue One) with an AER of 6.05 percent, according to moneyfactscompare.co.uk.
The account can be opened with a minimum deposit of £1,000 and up to £85,000 can be invested overall. Interest can be applied monthly on the day the deposit was first paid or annually on the anniversary of making the opening deposit. However, withdrawals are not permitted until the account term ends.
Cynergy Bank places just behind offering an AER of 6.01 percent on its Fixed Rate Bond. The account can also be opened with a minimum deposit of £1,000 and up to £1million can be invested overall.
Interest is calculated daily, beginning on the first working day following account opening, and is paid annually to the account balance.
Described as an account that’s “most suitable” for those who want to invest long term, withdrawals are not permitted until maturity – unless in exceptional circumstances.
RCI Bank UK’s Fixed Term Savings Account offers an AER of six percent, and savers can get started with £1,000. Up to £1million can be invested overall and interest can be paid monthly or annually. Withdrawals are also not permitted.
Top five-year fixed savings accounts
Topping the list of five-year savers is Cynergy Bank’s Fixed Rate Bond with an AER of 5.81 percent, according to moneyfactscompare.co.uk.
The account can be opened with a minimum deposit of £1,000 and up to £85,000 can be invested overall. Interest can be applied monthly on the day the deposit was first paid or annually on the anniversary of making the opening deposit. However, withdrawals are not permitted until the account term ends.
RCI Bank UK’s Fixed Term Savings Account falls just behind with an AER of 5.8 percent. The account can be opened with a minimum deposit of £1,000 and up to £1million can be invested overall. Interest can be applied monthly or annually, and withdrawals are not permitted until the account term ends.
Recognise Bank is also offering a competitive rate for its Five Year Fixed Rate Account at 5.75 percent. The account can be opened with a minimum deposit of £1,000 and up to £85,000 can be invested overall. Interest can be applied monthly or annually, and withdrawals are not allowed.
