The interest rates on fixed-term savings accounts and Isas are climbing towards 5 per cent after the outbreak of war in Iran, and annuity rates too are on the rise, providing a boost for pensioners.

A two-year savings account pays as much as 4.65 per cent, and the best five-year Isa is at 4.5 per cent. Meanwhile, the average annuity income went up £60 between March 2025 and March 2026.

It is some good news amid warnings of higher inflation and interest rates following the disruption to the supply of oil and gas through the Strait of Hormuz, which has pushed up commodity prices.

Money newsletter

The latest personal finance and investment news from our money team.

Sign up with one click

Hodge Bank is offering a one-year savings account at 4.42 per cent, up from 4.2 per cent at the start of the month, according to advice firm The Private Office. The top two-year deal is 4.65 per cent from Market Harborough building society, up from 4.17 per cent at the start of March. The top five-year deal is 4.51 per cent from Hodge Bank, up from 4.36 per cent.

Those looking to fill their £20,000 annual Isa allowance before the end of the tax year on April 5 can get 4.36 per cent on a one-year Isa from Hodge Bank, up from 4.1 per cent at the start of March. The top two-year Isa is at 4.4 per cent from the wealth manager Hargreaves Lansdown, up from 4.07 per cent. Hargreaves also has the top five-year Isa, paying 4.5 per cent.

Savers usually have 14 days once they open a fixed-rate deal to deposit their money. So if you think the top rates may have further to go you could open a top-paying account but wait to see if a better deal comes along. Anna Bowes from The Private Office said: “The danger with doing this is that you miss out on earning better interest while you wait. You could therefore fix some of your cash now, to take advantage of the rates, and keep some aside to deposit if rates continue to rise.”

For those nearing retirement, experts said annuity rates could soar in 2026. Analysis by the data firm MoneyFacts found that the average annual annuity income rose from £3,498 to £3,558 between March 2025 and March 2026.

Annuities are a retirement insurance product that pay a guaranteed income for life in exchange for a lump sum. The amount of income you get depends on annuity rates, and these tend to rise in line with gilts, which have surged in response to the Iran conflict.

Rachel Springall from MoneyFacts said: “Pensioners looking to secure an annuity for a regular income could see a boost to the rates on offer in the weeks ahead. Due to the unrest in the Middle East, retired people may want to protect their pension arrangements from stock market volatility, but also wait and see how firms review their pension annuity rates, due to rising gilts.”

The Bank of England held the base rate at 3.75 per cent last week, but only a month ago there had been widespread expectations that it would be cut. Expectations of where the base rate will be in future underpin the rates lenders offer to mortgage borrowers. More than 1,700 mortgage deals have been pulled since the end of February.

The average two-year fixed mortgage rate has risen from 4.83 per cent to 5.51 per cent, according to Moneyfacts, while the average five-year fix has risen from 4.95 per cent to 5.52 per cent.