National Savings and Investments (NS&I) has cut rates on its one-year savings bonds – just two months after raising them. But the government-backed provider isn’t the only one reducing returns.
Average interest on one-year accounts fell for the second month in a row and hit its lowest level in more than two years on 1 September. With rates expected to keep slipping – and five-year deals now beating shorter fixes – is it time to lock in for longer?
Here, Which? explains how fixing can help you beat the savings slump and weighs up whether longer is always better.
What’s happening to fixed savings rates?
This time two years ago, NS&I’s one-year Guaranteed Growth Bonds and Guaranteed Income Bonds offered returns of 6.2% AER – the best deal on the market for any fixed-term account.
Since then, returns have plummeted. Savers opening the latest issue of these bonds – launched on 2 September – will find the rate has dropped to just 4.04% AER.
Average interest has also been slipping across the market since the savings boom of 2023. Moneyfacts data shows how one-year and longer-term fixed bonds have declined over the past two years.
One-year fixes have taken the biggest hit. The average rate dropped to 3.96% AER on 1 September 2025, down from 3.99% in August, and well below the peak of 5.42% in October 2023.
Longer-term bonds (lasting more than a year) held steady between August and September – edging up from 3.88% to 3.89% AER – but they’ve also tumbled from a high of 5.12% in September 2023.
- Find out more: best savings accounts.
Is it worth fixing for longer?
Given the downward trend, many savers may be tempted to lock in before rates slide further. But how long should you fix for?
The table shows the best rates on fixed-term savings accounts. Results are ordered by term:
Table notes: rates sourced from Moneyfacts on 9 September 2025.
Five-year bonds currently offer the best rates, with the top deal from JN Bank paying 4.52% AER. This marks a return to the usual rule of thumb that the longer you fix, the higher the rate – a trend that was reversed in recent years when shorter-term bonds often paid more.
The main advantage of fixing for several years is certainty: your savings are protected from further rate cuts for longer.
Most providers stop at five-year terms, but Moneyfacts data shows a few banks now offer bonds lasting up to seven years.
Only four banks – Isbank, Shawbrook Bank, Bank of London and The Middle East, and UBL UK – currently have seven-year bonds. All pay below-average rates, with the best at 3.62% AER from Shawbrook.
3 reasons why fixing isn’t always best
Opening a fixed bond guarantees the same interest rate for the term, but it isn’t right for everyone. Here are the main drawbacks to consider before locking your money away.
No access
Once you’ve put money into a fixed account, most providers won’t let you touch it until the term ends. You usually can’t add to the balance either. While this helps remove the temptation to dip into savings, it also means you won’t have funds available in an emergency.
Some providers don’t allow early access at all, while others only do so in exceptional circumstances. In some cases, you can close the account or withdraw early in exchange for a loss of interest. Penalties typically range between 90 and 365 days.
If you’ve only held the account for a year and face a 365-day penalty, your savings won’t have grown at all. It’s important to weigh up whether a new account could make up for this loss before the end of its term.
Tax on interest
If you have a large lump sum to invest, you could end up with a tax bill.
The personal savings allowance lets basic-rate taxpayers earn up to £1,000 a year in interest tax-free, while higher-rate taxpayers get £500. Additional-rate taxpayers have no allowance.
This means a basic-rate taxpayer opening the best seven-year fix at 3.62% AER would start paying income tax on interest with around £27,625. For higher-rate taxpayers, the tipping point falls to £13,813.
- Find out more: tax on savings explained.
Can’t switch to a better deal
While rates are falling now, five to seven years is a long time. Think how much has changed in just the past few years. On 1 February 2021, the average one-year fix paid just 0.46% AER and longer-term bonds 0.68%.
Those who opened long-term fixed accounts before rates skyrocketed are still stuck with low returns and unable to switch to better deals. The same could happen if you tie in now and rates rise again.
- Find out more: how to switch your savings account.