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Finding the best fixed rate bonds

What are fixed rate bonds?

Fixed rate bonds, also known as fixed rate savings bonds or fixed rate savings accounts, usually offer a higher interest rate than instant access savings accounts, in return for locking away your money for a set period, usually between one and five years.

Fixed rate bonds are now looking more attractive to many savers – they offer some of the best interest rates around, and the reassurance of knowing just how much interest you’ll earn on your savings.

One and two-year fixed rate bonds tend to be the most popular choice at the moment, as many people don’t want to commit for longer in case interest rates go back up. However, the longer the fixed rate period, the higher the interest rate is likely to be, so if you’re looking for the best possible rate, a five year fixed rate savings account might be a better bet.

Is a fixed rate bond right for me?

If you want a good interest rate, don’t need access to your money and want the reassurance of knowing what your interest rate will be, then a fixed rate bond could be a good choice.

On the other hand, if you know you’ll need access to your savings before the fixed-rate period is up, then a bond might not be the best choice – some accounts do not allow you to make withdrawals at all, while with others, withdrawals often come at a cost – your interest rate may be reduced, you might not earn any interest in the month of the withdrawal or you might be switched to an account with a lower rate.

Best fixed rate bonds

Many fixed rate savings bonds also require a lump sum to start the account, usually between £500 and £5000, so if you’re starting to save from scratch, this might not be the best option.

How can I find the best fixed rate bonds?

The right account is different for everyone, use our checklist to find the best fixed rate bond for you:

  • What is the interest rate? This might sound very obvious, but some accounts have tiered interest rates depending on how much you have in your account, so make sure you know what the rate will be for your balance.
  • When does the fixed rate end and what rate does it revert to? Find out exactly when the fixed rate ends and make sure you make a note of the date. Once the fixed-rate period is up the account will probably revert to a lower rate, so make sure that you compare accounts and switch to one with the best rate you can find when it does.
  • Can you make withdrawals and are there any withdrawal penalties? Find out if you can make withdrawals, and if so, what withdrawal penalties there are and what impact they will have on your savings.
  • What is the minimum investment? Many fixed rate savings bonds require a lump sum deposit, so make sure you find out what the minimum is before you apply.
  • When is the interest paid? For example, will you receive the interest you earn monthly, annually or when the bond matures?
  • Can you make regular savings? Some fixed rate savings bonds allow you to pay more into your account, while others won’t let you make any more deposits after you’ve opened the account.
  • Do you need to have another account with the provider? Some banks and building societies restrict their fixed rate bonds to existing customers or require you to open another savings or current account.