Grab a fixed rate deal before they disappear: Banks now offering over 1% but it may not last if NS&I cuts its rates

Savers are being urged to grab a fixed-rate deal before they disappear.

One-year fixed savings rates have crept up above 1 per cent in recent weeks, with new banks leap-frogging each other to sit at the top of the best buy tables.

Competition has improved slightly because savers know they can earn 1.15 per cent with the Government’s own saving arm.

One-year fixed savings rates have crept up above 1 per cent in recent weeks, with new banks leap-frogging each other to sit at the top of the best buy tables

However, experts advise savers to move quickly as these deals may not last if National Savings & Investments (NS&I) cuts its rates.

Savers piled £45 billion into easy-access accounts in just four months over lockdown, while the amount in fixed-rate bonds fell by £3.5 billion.

But demand for fixed bonds is now soaring again, according to Hargreaves Lansdown and the Savings Champion website.

Rates on fixed-rate bonds tumbled when the Bank of England base rate fell from 0.75 per cent to 0.1 per cent in March because of the pandemic.

Yet with inflation now at 1 per cent, many will at least guard your savings from the eroding effects of the rising cost of living.

There are 77 fixed deals that match or beat inflation, compared to just three easy-access deals, according to Moneyfacts.

James Blower, founder of Savings Guru, says: ‘If you are happy to tie your money up, get a fixed-rate bond now.

‘But don’t go for more than one year as the extra interest you earn for tying your money up for longer is not worth it.’

Often you earn just 0.1 per cent more if you tie your money up for two years rather than one year — worth just £10 on each £10,000.

NS&I’s easy access Direct Saver and Income Bonds pay 1 per cent and 1.15 per cent respectively.

It also has a range of fixed-rate bonds available to existing customers, with a one-year deal paying a near-top 1.1 per cent.

In July, NS&I upped the amount it wants to bring in from savers to £35 billion from a previous £6 billion to help finance its Covid-19 expenditure and support savers.

At the start of the financial year from April to June, it attracted a huge £14.5 billion. That could rise to nearly £30 billion by the end of this month if it repeats the performance.

NS&I will then have to choose between cutting its rates or raising its target figure.

The Government bank has to give savers two months’ warning that their rate is falling. So if it’s the former, the announcement could come in the next couple of weeks.

Top rates do not last long because new banks are not looking to bring in vast sums.

Oaknorth’s one-year bond at 1.21 per cent, Charter Savings Bank’s 1.22 per cent, along with Secure Trust’s 1.16 per cent, were on sale for just over a week.

Best rates on one-year fixed-rate bonds now include Paragon Bank and United Trust Bank at 1.2 per cent and Allica Bank at 1.16 per cent.

Don’t bother with the big banks — they are paying as little as 0.2 per cent fixed for a year.

sy.morris@dailymail.co.uk

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