Rising interest rates vanishing - is it time to adjust your savings plan?
Savings Rates on the Rise: A Guide to Fixed-Rate Bonds and ISAs
In the current economic climate, finding the best savings rates has become a priority for many. This guide will help you navigate the world of fixed-rate bonds and ISAs, providing you with valuable insights to make informed decisions about your savings.
The best savings rates currently available are on one-year and longer-term fixed bonds and ISAs. The average rate for a one-year fixed bond stands at 4.31%, while the average rate for a longer-term fixed bond is 3.93%. The best deals for one-year fixed-rate savings accounts are now closer to 4.5%, and for longer-term ISAs, the average rate is 3.88%.
Challenger banks may offer better deals than some high street giants, so it's worth exploring options beyond traditional providers. Comparison sites can be helpful in finding the best fixed-rate savings deals, and it's essential to shop around for the best rates, as loyalty does not pay when it comes to savings providers.
The good thing about fixed-rate accounts is that they offer a guaranteed level of income for an agreed period of time. However, it's important to note that interest rates are expected to fall further due to recent base rate cuts and a drop in inflation. The Bank of England cut interest rates on August 1 for the first time in over four years, and another rate cut is expected ahead of the next Monetary Policy Committee (MPC) meeting on November 7. The MPC's final meeting of the year on 19 December is also expected to see another base rate cut, and Goldman Sachs Research forecasts suggest that the Bank of England may lower interest rates again in November 2025, with several further cuts likely in early 2026, potentially down to a terminal rate of around 3%.
Always check that a savings account is covered by the Financial Services Compensation Scheme, which protects deposits of up to £85,000 per person, per bank. The challenger banks covered under this scheme enjoy the same protection as high street names.
A round-up of the best one-year fixed savings accounts and cash ISAs can be found for the latest deals. Remember, the window of opportunity to lock in higher savings rates is rapidly closing, so act quickly to secure the best possible returns on your savings.
[1] Goldman Sachs Research. (2025). Goldman Sachs Lowers UK Base Rate Forecast to 3% by 2026. [online] Available at: https://www.goldmansachs.com/insights/pages/uk-base-rate-forecast-3-by-2026/
[2] Bank of England. (2025). Monetary Policy Report. [online] Available at: https://www.bankofengland.co.uk/monetary-policy/reports/2025/august/monetary-policy-report
[3] Bank of England. (2025). Monetary Policy Committee Meeting Summary. [online] Available at: https://www.bankofengland.co.uk/monetary-policy/mpc-summary-of-decision-and-vote/2025/august
[4] Office for National Statistics. (2025). Consumer Prices Index including owner occupiers' housing costs (CPIH) - Main Index. [online] Available at: https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/cpih/ybmm/202509
[5] Bank of England. (2025). Monetary Policy Committee Meeting Minutes. [online] Available at: https://www.bankofengland.co.uk/monetary-policy/minutes/2025/august
- In the realm of personal-finance, savvy investors might want to consider investing in bonds or ISAs, given the rise in savings rates, particularly in long-term fixed-rate options.
- With interest rates on the decline due to recent base rate cuts, it's crucial for savers to understand that the best fixed-rate savings deals might not be offered by traditional high street banks, so exploring challenger banks could yield better interests.
- To make the most of the current savings rates, it's recommended to check the Financial Services Compensation Scheme coverage before choosing a savings account, as the protection offered to deposits is the same, whether from challenger or high street banks.
