‘I bought my £85k bond a day early and lost hundreds’

Savers who lock money into fixed-rate accounts too early risk losing out on hundreds of pounds as banks raise interest rates.

The average one-year fix crept up by 0.2 percentage points to 0.44pc between April and May. Smaller banks now offer much more competitive rates. Locking into a top- paying account could potentially cost savers hundreds in lost interest payments if rates continue to rise, however.

Romain Hevry, 30, from London, deposited £ 85,000 into a one-year fixed rate savings account with Atom Bank the day before it raised its rates. The newer interest payment would have earned Mr Hevry significantly more over the 12- month term. Mr Hevry’s account pays 0.7pc, rather than the 0.85pc now offered by Atom, resulting in £128 in lost interest.

Mr Hevry asked Atom to change his rate, but the bank refused, arguing that it would not lower interest payments if the rate were to drop.

“I feel Atom Bank has been very rigid in an environment where cash savers are interest-starved. Showing just a little bit more flexibility would have gone a long way,” Mr Hevry said.

“I would urge other savers looking to lock into a fixed- term account to ensure they are happy with the rate and fully understand the implications. Once it’s locked, they will have little recourse but to wait for the end of the term.”

Atom Bank declined to comment.

Options for savers have grown for the first time in months, while average rates have climbed from historic lows as banks tried to lure in savers to fund their increased mortgage lending.

James Blower of Savings Guru, a consultancy, warned the upwards trend was likely to be short-lived.

“The drivers of the increases are short term, not systemic, and therefore

I don’t expect this to last,” Mr Blower said. “Rates will stabilise at the current levels in the next couple of months.”

Savers have saved more and more cash into easy-access accounts, a trend that intensified over the past year. The flow of cash into easy-access accounts in March was just shy of £14bn. So far this year, there has been an inflow of nearly £40bn, according to the Bank of England.

Eleanor Williams of Moneyfacts, an analyst, said: “Fixed rates appear to be stabilising. It is too early to tell whether we are starting to see signs of competition between banks benefiting savers.

“Some may feel that it is a little premature to lock their funds away and will perhaps instead wait and see what happens in the next few weeks. However, there is no guarantee rates will continue to rise.”

Most of the best deals are offered by smaller banks and building societies. Atom Bank’s 0.85pc one-year fix is the best on the market, followed by PCF Bank’s 0.79pc.

While interest rates have improved, no widely available savings accounts match or beat the current rate of inflation. Savings pots will therefore shrink in real terms. However, savers can slow this effect by switching away from a high street bank.

Most of the better-known banks offer just 0.01pc on easy-access accounts. Atom’s easy-access deal beats this at 0.5pc, while Marcus by Goldman Sachs pays out 0.4pc.

Ms Williams said: “The decision on whether to invest, and secure an account now, or wait a little longer and see if rates improve further, will very much depend on an investor’s attitude to risk.”

She added: “Market- leading deals tend to have a fairly short shelf-life, so keeping a close eye on the top rate tables would be wise.”