Rates on one-year bonds start to fall

Rates on one-year bonds start to fall

The average rate for a one-year savings bond has fallen for the first time since January 2017, as consumer demand for the products continues to grow.

Figures from financial data group Moneyfacts revealed the average rate on bonds of this term has fallen to 0.9 per cent from 1.07 per cent in January.

This time a year ago, the average one-year bond rate was 1.16 per cent.

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The fall comes despite the Bank base rate being increased in November.

Charlotte Nelson, finance expert at Moneyfacts, said the fall is disappointing news for savers who were hoping that the base rate rise would bring some pizzazz back into the savings market.

She said: "The challenger banks have been propping up the savings market for some time, but they will only offer a decent rate for their bonds if the rest of their business needs a financial boost.

"The reduction to the average one-year fixed rate this month could simply be a matter of the challenger banks dialling back their competitive efforts over the Christmas period."

Average RatesJan-17Jul-17Dec-17Jan-18
One-year fixed rate (excluding ISAs)0.90%1.07%1.18%1.16%
Source: Moneyfacts Treasury Reports     

According to Moneyfacts, consumer demand for fixed-rate bonds has increased by 3.3 per cent and they were the only adult accounts to see heightened demand in September.

Ms Nelson said: "It is a little concerning that the moment savers feel comfortable enough to consider a fixed rate bond, rates start to fall, leaving many to wonder if this foreshadows the economic climate for 2018.

"Either way, savers will have to put their best foot forward and keep on top of the Best Buys to ensure competitive returns are maintained."

Sam Blanning‪, adviser from Star House Financial Services in Bristol, said the best one-year rate he knows of is 1.8 per cent with Atom Bank.