Fixed rates near their peak?

The latest inflation figures are out and surprisingly the Consumer Prices Index (CPI) remained at 2.8% for the 12 months to May 2026. That said, we still expect inflation to jump up a little in the near future, as the effects of the war in the Middle East bite – and we know that the energy price cap is set to increase by 13% in July!  

But this latest inflation news means that it’s no real surprise that the Bank of England’s Monetary Policy committee (MPC) held the base rate at 3.75% this month.

Seven of the nine members voted to hold although there were two members who supported a rate rise as they are concerned that higher energy costs could lead households and businesses to expect inflation to stay higher for longer, which could push up wages and prices more generally. They believed a small increase now would help keep inflation expectations under control and reduce the risk of inflation remaining above target in the future.

Nevertheless, the expectation for the base rate to stick is reflected by the slowdown in savings rate hikes that we’ve seen recently; we’ve even seen a few reductions of late. However, there are still plenty of really competitive rates available - so for those looking to lock away some of their cash, it's time to get a move on!

What’s been happening to rates?

At the beginning of the year, we were expecting to see some base rate cuts throughout 2026 as there were signs of inflation easing. But the war in Iran which started at the end of February overturned that sentiment, and the markets expected the Bank of England to start hiking interest rates instead.

As a result, fixed-term savings rates started to rise in anticipation. So, let’s take a look at what’s happened so far;

Fixed Rate Bonds

Since the beginning of the year the top fixed savings rates have soared, even though the Bank of England base rate has remained at 3.75% since December last year.

In the 1-year table, in January the top rate was 4.45% with Union Bank of India and the average of the top five was 4.30%. But rates have increased steadily and at the time of writing you can now earn up to 4.85% with MBNA.

The increase has been even more dramatic in the longer-term tables.

At the beginning of the year, the top 2-year bond was paying 4.20% and the top 3-year available was 4.21%. Today you can earn as much as 4.85% with the app-only bank Afin Bank for both terms.

And over five years, the top rate available has increased from 4.31% six months ago, to 4.90% today, once again with Afin Bank.

For those who would prefer not to use an app to open an account, the rates are not too much lower. The top 2-year online account is with GB Bank paying 4.82%, the top 3-year and 5-year online accounts are with Oxbury Bank paying 4.83% and 4.88% respectively.

Fixed Rate ISAs

From April 2027, the amount that the under 65s will be able to deposit into a cash ISA will fall to £12,000. This has boosted their popularity, as those who can afford to make use of the full £20,000 allowance whilst it’s still available have rushed to do so. So, it’s good to see that the top rates available have reacted to market expectations too.

The top 1-year ISA today is 4.68% with Investec, up from 4.30% in January whilst once again the increases have been even higher for the longer-term accounts.

At the moment you can still secure a rate of 4.72% for 2-years and 5-years, whilst the top rate for a 3-year ISA is 4.68%. But when you consider that at the beginning of the year you could earn just 4.16%, that’s a significant improvement – and one to take advantage of if you can.

Of course, it looks as though the ISA rates are worse than the equivalent fixed rate bonds, but if you pay tax on your savings, then the tax efficient nature of the ISA becomes more obvious. Whilst the top 1-year bond is paying 4.85% AER, higher than the ISA rate of 4.68%, if you deduct tax from the return, the ISA can produce a far better return.  

Let’s assume a deposit of £20,000. If you were to put this into the 1-year bond, this would produce £970 in gross interest. If you have already fully utilised your Personal Savings Allowance however, you would have to pay 20% tax on this amount which is £194, giving you a net amount of £776. If this £20,000 were in the cash ISA however, the tax-free return would be £936 – so you would take home more, even though the headline interest rate is less.  

And let’s not forget that the tax on savings interest is increasing to 22% from April 2027.

For many a stocks and share ISA is the preferred choice and over the longer term is likely to provide a better return, but for those who are not currently using their full ISA allowance and have savings in taxable accounts, it makes sense to be as tax efficient as possible. So don’t waste the allowance as if you don’t use it, you will lose it.

Are the good times over?

There’s been a marked slowdown in activity in the fixed rate bond and ISA tables recently and we’ve even seen a few top paying accounts withdrawn, and in some cases replaced with lower paying issues.

So, for those who have been thinking of locking some of their cash away, taking action sooner rather than later could prove worthwhile. While nobody can predict exactly where rates will go next, today's best buys already reflect much of the market's expectation for higher inflation and interest rates.

For the latest rates, visit our Best Buy tables.

Arrange your free initial consultation

Rates correct 19/06/2026

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. The Financial Conduct Authority (FCA) does not regulate tax advice.  

Investment returns are not guaranteed, and you may get back less than you originally invested.