Average rates on longer-term fixed bond rates are indicating that a downward trend is on the horizon, Moneyfacts has suggested.

The comparison website has found that the top two, three and five-year fixed bonds remained unchanged month-on-month, with the top four-year bond falling to 4.54%.

Meanwhile, the top one-year fixed bond rose to 5.40% gross, which is now 0.45% higher than the top five-year fixed bond at 4.95% as of 1 August, which is a rise of 0.30% month-on-month.

In February 2024, the rate gap between the top one and five-year bonds was 0.52%, sitting at 5.16% and 4.64% respectively.

Compared to a year ago, the top one-year bond paid 6.05%, with the average five-year bond paying 5.80%.

Finance expert at Moneyfacts, Rachel Springall, said: "Savers sitting on the fence to invest their cash with a fixed rate bond may wish to do so quickly, as the top rates are not guaranteed to sit on the shelf for long. Those waiting for their bond to mature and cannot yet grab a new deal would be wise to brace for impact as rate cuts could be on the horizon.

"The Bank of England base rate cut is expected to slowly trickle through the savings market over the coming weeks and, while this typically impacts variable rates, the consequences can also lower interest rates on accounts that guarantee returns, like fixed bonds. The top fixed bond rate tables show stagnation across those with the longest terms month-on-month, so these deals which hold a firm place may well have cuts on the horizon."

Currently, the average one-year fixed bond at 4.63% gross is now 0.71% higher than the top five-year fixed bond at 3.92% at the start of August, which is a rate gap of 0.66% a month prior.

Compared to six months and a year ago, the gap between one and five-year bonds sat at 0.74% and 0.44%, respectively.

Springall added: "Challenger banks are still holding the top rate positions in the market, with one-year bonds proving popular for those brands looking to draw in deposits to fund their future lending. However, any cuts can have a rippling effect, as providers quickly move to adjust their market positions; it’s all in the margins. In a traditional market, savers would be encouraged to invest their cash for longer to get a higher guaranteed return, but this has not been the case now for over two years, where a top five-year bond previously paid more than a one-year bond.

"There may be presumptions among some savers that competition is lacking across fixed rate bonds, but that would be untrue. There have indeed been brands readjusting their position in the market to better manage the flow of funds or in a reaction to their peers dropping rates, but in contrast there are also brands very keen to grab the spotlight to draw in deposits. Savers need to act now to grab a new deal, or they could be left disappointed."

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