5-Year Fixed Savings Rates in 2023

Millyonare

Crystal ball time...

What do we think the Bank of England base rate will peak at in 2023 (or 2024), and which month or quarter, and why?

What do we think will be the highest (peak) 5-year fixed UK savings rate for a highstreet or fintech bank in 2023 (or 2024), and which month or quarter, and why?

Today's highest 5-year fixed savings rate, on Aug 18, 2022, is around 3.50% (with Aldermore). The BoE base rate is 1.75%.

What about tomorrow? Curious to hear thoughts and opinions from the crowd.

* Aug 18, 2022
BoE = 1.75%
Five-year fixed = 3.50%

*2023 peak
BoE = ???
Five-year fixed = ???

whatleytom87

I think, we’re probably not far away from seeing the highest fixed rate over 5yrs. Fixed terms aren’t necessarily pegged to base rate, more the forward view which is what swap rates consider. 

Whilst base rate is expected now toward 3% within the year, the longer term horizon is weaker with base rate reductions expected mid 2023. This has to be priced in to some degree for longer term offerings. 

I think given the latest inflation readings and assuming it does come under control in the coming months it won’t be long before we see a top for the longer term fixes. 

ZeroSum

Future increases are often priced in.

Something to consider is that Atom have recently upped their 1 Yr fix to 2.95%. Their 2-5 Yr fixes are all lower at 2.75%

Nationwide mortgage rates are lower for the 5 Yr than the 2 & 3 Yr fix

And currently there isn't that much difference between the top 5 Yr fix & top 2 Yr fix (0.15% or something)

They might creep up a bit more, but the market expects rates to level off by end of the year & start dropping around 2024/25

Albermarle

There used to be a general mantra not to go for 5 year fixes on savings, as it was too long and anything could happen. I do not see it mentioned much nowadays but could be good advice to follow .
I would expect when the economy stutters over the winter, that the enthusiasm for interest rate rises will wane, especially as they do nothing to counter energy price inflation. Will reach max 3% in my view, although could be wrong of course.
Maybe the fixed rate savings will go up another 0.5%/0.75% at most .

Pompeydave1967

ZeroSum said:

Future increases are often priced in.

Something to consider is that Atom have recently upped their 1 Yr fix to 2.95%. Their 2-5 Yr fixes are all lower at 2.75%

Nationwide mortgage rates are lower for the 5 Yr than the 2 & 3 Yr fix

And currently there isn't that much difference between the top 5 Yr fix & top 2 Yr fix (0.15% or something)

They might creep up a bit more, but the market expects rates to level off by end of the year & start dropping around 2024/25

Just checked Shawbrook and it’s the other way round with rates …2.15 % fixed 1 yr , 3.27 % fixed 2 yr. 

Troytempest

Difficult to judge.
I am 3 years into a 5 year bond at 2.4% with Shawbrook. So have done very well for the first 3 years but might lose a bit in the last 2.....

P933alilli

Another thing to consider is that on Aldermores 5 year fixed at 3.5% is that you can go through to maturity which means that effectively the interest compounds and it becomes a c. 3.75% fixed. I'm wondering if its worthwhile into next year if it reaches 5%. If inflation stabilises in a couple of years  to anything like 2-4% it would then become a decent deal especially if the markets continue to be subdued!

southone

I am watching that account too but am waiting a bit longer as i feel rates are set to go a lot higher at 6% i may jump

refluxer

Collyflower1 said:

Another thing to consider is that on Aldermores 5 year fixed at 3.5% is that you can go through to maturity which means that effectively the interest compounds and it becomes a c. 3.75% fixed. I'm wondering if its worthwhile into next year if it reaches 5%. If inflation stabilises in a couple of years  to anything like 2-4% it would then become a decent deal especially if the markets continue to be subdued!

Can you explain what you mean ? When AER figures are quoted for longer-term fixed rate accounts, they take into account / make presumptions that interest is added every month or every year and compounded, so how can an account quoted as 3.5% AER end up paying 3.75% ?

P933alilli

Example, on £50,000 @ 3.5% annually will return £1750 at the end of the year, so after five years you'll have £8750 in interest.
But if £50,000 is left until it matures five years later its £50,000 X 1.035^5 = £59,384.32 which earns  £9384.32 interest. Then £9384.32/5 = £1876.86 per year. £1876.86/£50000 x 100 = 3.754%

refluxer

Collyflower1 said:

Example, on £50,000 @ 3.5% annually will return £1750 at the end of the year, so after five years you'll have £8750 in interest.
But if £50,000 is left until it matures five years later its £50,000 X 1.035^5 = £59,384.32 which earns  £9384.32 interest. Then £9384.32/5 = £1876.86 per year. £1876.86/£50000 x 100 = 3.754%

Ah, OK - I see what you're saying. So the Aldermore account pays 3.5% AER each year which (after 5 years) actually equates to a 3.75% total return on your initial deposit, if the interest is paid into the account every year.