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Compare the best fixed-rate bonds

Find the best fixed-rate bond that offers a high interest rate 
Best savings accounts image version 2
Last updated
January 31, 2023

What is a fixed-rate bond?

A fixed-rate bond is a type of savings account that allows you to put your money away for a set amount of time. You aren’t able to take the money out or add more money during this time, but in exchange you are normally rewarded with a higher interest rate in comparison to other savings accounts. 

You are also paid a fixed interest rate on the amount of money you put into the bond and this shouldn't be impacted if the Bank of England’s base rate changes. 

Don’t forget - if you decide to access the money you will normally be penalised. 

Fixed-rate savings accounts should not be affected if the Bank of England base rate changes."

How do fixed-rate bonds work?

With a fixed-rate bond you are locking your money away for a set amount of time, which varies from one year to seven years. If you have a longer term, the higher the rate should be. 

A fixed-rate bond is perfect if you have a large sum of money that you wish to earn interest on, but isn’t suitable if you would like to add money on a monthly basis. 

Bear in mind that when you open a fixed-rate bond it normally requires a minimum amount of money to open the account and generally you are only allowed to pay in once. Interest is then either paid monthly or once a year.

The average interest rate for a 3-year fixed-rate bond[1]
3.85%

Who should buy a fixed-rate bond?

If you are looking for a good rate of interest and the security of knowing how much interest you’ll earn over time, then a fixed-rate bond is a good option to explore. The ‘fixed-rate’ is key and it means you’ll be guaranteed a certain amount of interest, regardless of whether interest rates are falling.

However, on the flip side of this, if interest rates rise you will be unable to take advantage of this. This means one or two-year fixed bonds tend to be popular as then you aren’t committing for too many years when interest rates could rise in your favour. 


fscs-logo
Is my money safe?
The Financial Services Compensation Scheme (FSCS) guarantees that the first £85,000 you have saved with a registered bank or building society (or first £170,000 for a joint account) will be safe even if the business goes bust.

5 things to consider before choosing a fixed-rate bond

1. The interest rate

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.

2. 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.

3. The withdrawal rules

Find out if you can make withdrawals, and if not, what withdrawal rules there are and what impact they will have on your savings.

4. The restrictions

Some banks and building societies restrict their fixed-rate bonds to existing customers or require you to open another savings or current account.

5. The date the fixed-rate ends

Find out exactly when the fixed-rate ends and make a note of the date. After the fixed-rate period is up the account will probably revert to a lower rate. Compare accounts and switch to one with the best rate you can find when it does.

5 things to consider before choosing a fixed-rate bond
1. The interest rate

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.

2. 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.

3. The withdrawal rules

Find out if you can make withdrawals, and if not, what withdrawal rules there are and what impact they will have on your savings.

4. The restrictions

Some banks and building societies restrict their fixed-rate bonds to existing customers or require you to open another savings or current account.

5. The date the fixed-rate ends

Find out exactly when the fixed-rate ends and make a note of the date. After the fixed-rate period is up the account will probably revert to a lower rate. Compare accounts and switch to one with the best rate you can find when it does.

The best fixed-rate bond deals

We’ve compiled the best fixed-rate bond deals currently on the market so you can see which provider might best suit your needs.

Editor’s pick
One of the highest interest rate for 1 year fixed-rate bond
Card
FirstSave 2 Year Loyalty Bond Issue Feb23 Ex/C
Open with
£1,000
Interest rate
3.6% AER fixed
Term
2 years

No withdrawals or closure permitted, unless the customer is moving permanently abroad, where withdrawals or closure will be subject to 90 days' penalty interest plus a £250 admin fee.

Show Details
Eligibility
Minimum Initial Deposit
£1,000
Maximum Initial Deposit
£2,000,000
Permanent UK Resident
YES
Rate Tiers
Gross rate
Including bonusExcluding bonus
3.6%3.6%
AER rate
Including bonusExcluding bonus
3.6%3.6%
Editor’s pick
One of the highest interest rate for 2 years fixed-rate bond
Card
Aldermore 5 Year Fixed Rate Bond
Open with
£1,000
Interest rate
4.25% AER fixed
Term
5 years

No withdrawals or closure permitted during the term of the account.

Show Details
Eligibility
Minimum Initial Deposit
£1,000
Maximum Initial Deposit
£1,000,000
Permanent UK Resident
YES
Rate Tiers
Gross rate
Including bonusExcluding bonus
4.25%4.25%
AER rate
Including bonusExcluding bonus
4.25%4.25%
The editorial team regularly checks the rates and top picks on this page, updating them at least fortnightly.
Interest earned on different fixed-rate bonds
Interested earned on £2,000 over one year with a 1 year, 2 year or 3 year fixed rate bond.

Source: Defaqto and Uswitch. Updated: December 11

Advantages and disadvantages of fixed-rate bonds

Advantages
You know how much interest you should earn at the end of the term
Perfect if you have a lump sum of money which you want to save
Interest rate is normally higher compared to other savings accounts
Disadvantages
You can’t access your savings for a fixed period of time
Not suitable for regular savings
If interest rates rise you could get a better deal elsewhere

What happens when a fixed-rate term ends?

The good news is that your bank or building society should contact you in plenty of time before the fixed-rate term ends. They will ask what you would like to do with the money and offer some suitable options. This could be reinvesting the money in a new bond, setting up a new bond and adding more money to it or closing the account and withdrawing all the savings. 

At the end of the fixed term you'll have to decide what to do next."

What are the alternatives to fixed-rate bonds?

If you're prepared to lock your money away for the medium to long term, and you're looking for a savings account where your cash can grow tax-free, then you could consider an Individual Savings Account (ISA).

You could put your money into a stocks and shares ISA or a cash ISA, or a combination of both. If you want to put your money into an account without any stock market investment, a cash ISA could be the best option.

Investment ISAs put your capital at risk so this means you could get back less than you originally invested.

Fixed-rate bonds FAQs

How does Uswitch choose its editor’s picks?

We know that the best deals are always changing, so the editorial team at Uswitch regularly checks the rates on this page and updates them at least fortnightly. To find the best deals we compare products by taking various factors into consideration, like the interest rate (AER), the balance needed to get the highest interest rate, minimum initial deposit, withdrawal conditions and the term of the account as applicable. These factors change subject to the category.

We use this system for the whole of the market covering nearly all, so you can get an overview of what the banks and credit unions are typically offering in the UK. All the banks featured are FSCS protected, so you can be reassured that your money is safe, provided it’s within the defined limits and regulations. To find out more about how FSCS looks after your money, visit fscs.org.uk.

How can I make sure I’m choosing the best savings bond?

The best bonds to invest in are those which suit your savings needs. In other words, don’t choose a long term fixed rate bond as a place for money that you may need in the short term.


How much money do I need to open a fixed-rate bond?

It will depend on the bank or building society but most fixed rate bonds require a minimum deposit to open the account. This could be as little as £1, but typically it starts about £500.

Can I open a fixed-rate bond online?

Absolutely. It is similar to other savings accounts where you can open a fixed rate bond online or by visiting your bank’s local branch.


How many fixed-rate bonds can I open?

There is not a limit, but remember to keep some money aside as it’s not a good idea to lock away all your savings as you might need it in an emergency.

Do I have to pay tax on the interest earned?

If you exceed your Personal Savings Allowance then yes, you’ll need to pay tax. This means basic-rate taxpayers (20%) earn up to £1,000 in interest without paying any tax on it. If you are a taxpayer at a higher rate (40%) you can earn £500 in savings per year with no tax.

About the author

Lucinda O'Brien
Lucinda O'Brien has spent the past 10 years writing and editing content for regional and national titles. She applies her industry knowledge to ensure readers can make confident financial decisions.
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References
1. Defaqto data updated in December 2022 The average interest rate for a 3-year fixed term bond.