Fierce competition drives fixed rates to three year highs


I was looking back at historic rates, to pull this round up together, and even I was astonished at how fast rates have risen.  Just four weeks ago, the second best 1 Year Fixed rate was 1.70% from Zopa yet today there are 17 providers paying 1.80% or more! In our weekly newsletter to savers last week that I wrote it was only a matter of time before 2% was breached - I didn't expect six to do it within four days!

There's three key factors driving the growth of rates currently:

1) Acquisitions - it was announced in Feburary that Masthaven Bank would wind down by the end of 2023 and inevitably some of the banks looking to attract new savers will be seeking to acquire the lending books of Masthaven, as well as other loan books which are available in the market.  We saw similar strong activity last August and later last year it was announced that Allica Bank had bought AIB's SME book and Tandem had bought Oplo.  We believe similar activity is driving rates now.

2) Strong organic growth - the financial results of many of the challenger banks have shown strong growth in lending and there's little sign of a slow down in 2022.  This growth needs savings deposits to fund it

3) Expectation of rising rates - ask any senior banker and you'll struggle to find many who don't expect interest rates to rise in the next 1 - 2 years.  This is feeding through to behaviour as many banks take the view that interest costs (to savers) will get more expensive going forward so they might as well get them onboard as soon as possible, and therefore at the cheapest cost.

The likelihood is that rates will continue to tick up in the coming months, albeit we expect the market to stabilise when the acquisitions being funded have completed, however we can't see the current size of increases being maintained.

Here's our round up of the best fixed rate bond deals currently available:

1 Year Fixed

Al Rayan moved just before the close of play on Friday to regain top spot with an improved 1 Year Fixed rate of 2.11%.  They'd earlier seen Charter Savings Bank and Kent Reliance, both owned by One Savings Bank, take top spot with a then best buy of 2.05%.  The Charter Savings Bank 2.05% 1 Year is also available on the Raisin savings platform which is also paying a £30 sign up bonus to savers depositing £10,000 or more on the platform.  Gatehouse Bank and Cynergy Bank also improved their 1 Year Fixed rates to 2% on Friday.

2 Year Fixed

There was a frenzy of activity in 2 Year Fixed too on Friday with Al Rayan regaining the top spot which changed hands three times during the day.  Charter Savings Bank and Kent Reliance initially led the way at 2.35%, which itself was a 0.10% increase on the next best.  However, they were trumped by SmartSave Bank, who improved their 2 Year to 2.37% in the afternoon before Al Rayan upped their rate to 2.42%.

3 Year Fixed

It was a similar story in 3 Year where Charter Savings Bank and Al Rayan led the way.  The former went top with 2.50% at the start of play on Friday before Al Rayan's late move to 2.57% regained top spot.  Both providers sit well clear of next best, Cynergy Bank, who sit some way back paying 2.35%.

4 Year Fixed

It was a different story in 4 Year where a completely different set of banks fought for top spot.  United Trust Bank (2.30%) lead the way from OakNorth (2.28%) and Gatehouse Bank (2.25%) but all of these rates are eclipsed by the best 3 Year rates.

5 Year Fixed

It's a similar story in 5 Year where the leading provider, Gatehouse Bank (2.50%) is beaten by the best 3 Year deal.  PCF Bank (2.41%) and Monument (2.40%) complete the top 3 there and it will be interesting to see if they respond to last week's movements with increases of their own this coming week.

About The Savings Guru

We help savers get the best deal for their money by providing unique insight in to the savings market.  We help prospective banks apply for a banking licence and we help build customer services, products and marketing for them.  We also work with existing banks and building societies to improve their savings propositions.  This  insider view of savings means we are uniquely placed to help savers.

Find out moreMeet the Team

Ask the Guru a Question

Your Name:*
Your E-mail:*
Your Question*