Fixed savings rates hit 5% for first time since 2024 as banks compete for deposits
Savers can now lock in fixed-rate returns of 5% or more for the first time since 2024, as banks intensify competition for deposits amid a shifting economic landscape.
The milestone comes even though the Bank of England has held its base rate at 3.75% since December 2025, maintaining this level through February, March, April and June 2026. The Monetary Policy Committee's next decision is scheduled for 30 July 2026.
According to Moneyfacts, the top five-year fixed bond rate has climbed to 4.94%, the highest offer since August 2024 when it stood at 4.95%. The surge in fixed rates marks a notable shift after the base rate fell from 5% in August 2024 to 3.75% by December 2025.
Broader savings market revival
The improvement extends beyond fixed accounts. The Moneyfacts Average New Savings Rate reached 3.59% in July 2026, its highest point since May 2025, suggesting a broad-based recovery in savings returns across the market.
UK household deposits reached £2.19 trillion in early 2026, growing 4.3% despite inflation remaining above the Bank of England's 2% target. Average monthly savings have increased from £226 to £288 between 2025 and 2026, according to NatWest's Savings Index survey conducted between December 2025 and January 2026.
Inflation backdrop
The return of competitive fixed rates comes as UK inflation eased to 2.6% in June 2026 from 2.8% in May, marking the lowest reading since March 2025. The decline was driven by moderating fuel and food costs.
However, only 18% of live easy access accounts currently pay more than the 3.75% base rate, according to Moneyfacts data from July 2026, highlighting the advantage of fixed-rate products for savers willing to lock away their money.
Split at the Bank of England
At the Bank of England's 18 June meeting, the Monetary Policy Committee voted 7-2 to hold the base rate at 3.75%, with two members voting to increase the rate to 4%. The split decision suggests uncertainty about the future direction of rates.
Geopolitical factors are also influencing the outlook. The conflict in the Middle East and its impact on energy prices has altered UK economic forecasts and is expected to influence inflation trends, potentially causing the Bank of England to hold rates at higher levels for longer than previously anticipated.
Should you open an account?
Fixed-rate accounts offer certainty in an uncertain economic environment, locking in today's rates regardless of future base rate movements. For savers who can afford to tie up their money for one to five years, current rates of 5% or above represent a significant improvement on the easy access alternatives available to most customers.
However, savers should consider their liquidity needs carefully, as fixed accounts typically penalize early withdrawals. With the next Bank of England decision due imminently and inflation still above target, the direction of future rate movements remains a key consideration for anyone choosing between fixed and variable savings products.
