Savers were keen to fix for one year in 2015, according to Which? research, with most people preferring standard savings accounts to Isas, despite the tax-free benefits.
We analysed the 20 most clicked-on products from Which? Money Compare in 2015, and found that one-year fixed-rate bonds were the most popular.
Instant-access took second place, while only one of the top 20 was a two-year fix. In fact, none of the most clicked-on products had a fixed-rate period of longer than two years, suggesting that many people are holding out for better rates.
If you want a new home for your money in 2016, search through thousands of savings and Isa products in the impartial Which? Money Compare tables.
Savers keen to fix for one year
One-year fixed-rate bonds took the top spot in our analysis of 2015.
These have become firm favourites for savers looking to balance a decent rate over the short-term, without the risk of missing out on more favourable returns when rates start creeping up.
Generally, the longer you lock your money away for, the higher the return, so fixed-rate bonds lasting for three or five years are the big hitters. However, if market rates rise during that time, these accounts can quickly become uncompetitive.
Following the recent rate hike in the US, many experts are predicting that the Bank of England will increase the UK base rate in 2016.
This should stir some upward movement in the savings market, although we don’t yet know when this will happen, or whether providers will pass on any future rate rise to savers.
Which? Money Compare table: search through the best fixed-rate bonds
Instant-access accounts were the second most popular.
With no penalties for withdrawals, these accounts are the obvious choice if you want to earn interest without losing access to your money.
You won’t get the best rate on the market but you can make as many withdrawals as you like – and of course you can top it back up again.
Which? Money Compare table: build up a safety net in an instant-access account
Boost your rate with a regular saver
Regular savers were third most popular.
Regular savings accounts offer a far better rate than a typical one-year fix and they can be useful vehicles for disciplined saving.
However, the advertised rate isn’t necessarily as attractive as it first sounds because there are specific limits on how much you can put away, typically from £10 to £300 per month.
Your money builds up gradually so only the first month’s payment earns the headline rate of interest for the full year.
Which? Money Compare table: get into the savings habit with a market-leading regular savings account
Traditional savings accounts more popular than Isas
Traditional savings accounts proved more popular than Isas in 2015.
The generous tax break usually means that cash Isas are the first port of call for savers, with anyone over the age of 16 allowed to save up to £15,240 a year. But, the big news for savers is a new personal savings allowance, which could make Isas less attractive in the short-term.
As of 6 April 2016, all basic rate taxpayers will be able earn up to £1,000 in interest from their savings without paying tax, falling to £500 for higher-rate taxpayers.
Based on an interest-rate of 1.5%, most people would be able to save £66,600 before owing tax – the limit for higher-rate taxpayers is just shy of £33,300.
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