Should you lock into a fixed-rate savings account paying 5.25%?

Returns on the top fixed-rate savings accounts are at their highest level in years and still climbing, with some now paying up to 5.25%.It leaves those with money to put away facing a choice: lock into some of the best interest rates on offer in several years or hold your nerve in the hope they get even better?While new fixed mortgage rates have jumped in recent months – dealing a blow to many homebuyers and those aiming to remortgage – their pain has been savers’ gain.This month, the data provider Moneyfacts said fixed savings rates were at “multiyear highs”, fuelled by strong competition, and this trend has continued: on Thursday the average new one-year fixed savings bond rate was 4.41%.With a fixed-rate savings bond, you typically have to tie up your money for between six months and five years, and they provide a clear, guaranteed return. The one-year version tends to be popular as many people do not want to tie up cash for long periods.The top-paying accounts are offering a fair bit more than that average: at the time of writing, GB Bank had a one-year fixed-rate bond paying 5.05%. Meanwhile, Kent Reliance had a 13-month acciunt offering 5.06%. (With both, the minimum deposit is £1,000.)Returns on the top fixed-rate savings accounts are at their highest level in years. Photograph: Peter Dazeley/Getty ImagesThe best-buy rates are even higher if you tie up cash for longer. This week, GB Bank, Shawbrook Bank and Vanquis were among those paying 5.25% on a five-year fixed bond.However, some savers will recall that as recently as late 2023 there were fixed bonds paying 6%, and if and when the Bank of England base rate goes up, that could push returns on savings higher than they are now.Many economists predict the Bank will lift the base rate before the end of this year, with further rises thought likely next year.Rachel Springall at Moneyfacts expects the deals on offer to savers “to get even better”. However, she cautions that we do not know the path interest rates will follow, and that anything could happen in the next few months or so.Those with cash to stash may want to hedge their bets by putting some into a competitive fixed-rate bond now and keeping another chunk in a high-paying easy access account. There are easy access accounts paying up to 5%.Some fixed-rate savings bonds will let you “drip-feed” cash in – for example, some will let you add money while the account is still open to new customers, while others have a specific “funding window”, which might be a few weeks but can be just a few days.The cost of living is still a big issue, with many worried about the prospect of higher energy bills this winter – so it could be a mistake to put all your savings cash out of reach. Springall suggests spreading your money across fixed-rate products and accounts that are accessible, plus also making use of tax-free cash Isas.Do you have an Isa? Photograph: Leonora Oates/AlamyIf you are aiming to put some money into savings or switch providers and are not using your Isa allowance at all, you are missing out on valuable tax benefits.Rates on fixed cash Isas are often slightly lower than for similar non-Isa accounts, although not always: Shawbrook Bank’s five-year fixed savings bond and five-year fixed cash Isa pay 5.25%.Every tax year you can save up to £20,000 in Isas, but from April 2027, the rules will change for anyone under 65. Instead of being able to put all of the money into a cash Isa, that element will be capped at £12,000. If you are 65 or over, all £20,000 can still be put into a cash Isa.