Find our best fixed rate bonds

Get a higher interest rate of up to 5.06% with a fixed rate bond

Discover how our best fixed rate bonds could work for you, including what happens when the term ends.

Compare our best fixed rate bonds

Choose the best fixed rate bond for you from leading providers
AldermoreRaisin UKRCI BankLeeds Building SocietyTesco BankInvestecAldermoreRaisin UKRCI BankLeeds Building SocietyTesco BankInvestec
Last updated
April 11th, 2024

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What is a fixed rate bond?

A fixed-rate bond, sometimes known as a savings bond or a fixed rate savings account, is a type of savings account that holds your money for a set period of time, known as the term. You're paid a fixed interest rate on the amount you have in the bond for the duration of the term.

Fixed rate bonds usually pay a higher interest rate compared with savings accounts that give you easier access to your money. So you won't be able to take cash out or add more money during the fixed term.

This is why a fixed rate bond is a good option for those who already have a lump sum of money, but will only need the money in the next one to three years, though you can get five year fixed rate bonds as well.

Read our in-depth guide on fixed rate bonds.

How do fixed rate bonds work?

Fixed rate bonds work by locking your money away for a set term, during which you earn a fixed rate of interest .

The terms on fixed rate bonds can vary from one year and go up to seven years and typically, the longer the term of the bond, the higher the rate will be.

However, unlike ordinary savings accounts, most bonds don't let you add money little by little, you need to deposit all the money you want to invest in a lump sum.

Rates on fixed-rate accounts have been falling this year, with some providers dropping rates by nearly 25%. This means savers should explore all the current options to make the most of their savings pot.
Top interest rate for fixed-rate bonds over time

The top interest rate per term from August 2023 to February 2024 - data from Deqfato and Money.co.uk. These rates exclude deals for existing customers, any area restrictions and children's savings accounts.

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How to choose a fixed rate bond

There are different types of fixed rate bonds in the market, so it's important that you choose the right one that suits your needs.

Evaluate your funds

The first thing you need to do is establish how much money you would like to save and when you'll need to access it.

Decide on a timeframe

Once you've made these decisions you can choose the correct length of term for your fixed rate bond, which ranges from one to seven years.

Compare interest rates

Do your research and compare interest rates for all the fixed rate bonds currently in the market. You can start this research by reviewing our editor's picks below.

Check all the terms and conditions

Finally, don't forget to check all the terms and conditions, including the maximum and minimum deposit and whether there are any penalty fees.
fscs-logo
Is my money safe?
The Financial Services Compensation Scheme (FSCS) guarantees that the first £85,000 you have saved with a UK-authorised bank or building society (or the first £170,000 for a joint account) will be safe even if the business goes bust.

Our best one-year fixed rate bond

Our editors picked this deal by weighing several factors such as the interest rate, term, withdrawal conditions, minimum opening balance and others for this product.

Card
Tesco Bank 1 Year Fixed Rate Saver
1 year
Term
5.06%
AER fixed
£2,000
Open with
FSCS
Protection scheme
How we score our products
Expert verdict
4.8/5
Apply now
Account details
No withdrawals or closure permitted during the term of the account.
Eligibility
Minimum Initial Deposit
£2,000
Maximum Initial Deposit
£5,000,000
Permanent UK Resident

Our best two-year fixed rate bond

Our editors picked this deal by weighing several factors such as the interest rate, term, withdrawal conditions, minimum opening balance and others for this product.

Card
RCI Bank 2 Year Fixed Term Savings Account
2 years
Term
4.9%
AER fixed
£1,000
Open with
FSCS
Protection scheme
How we score our products
Expert verdict
4.8/5
Apply now
Salman Haqqi, our savings expert says..
"This 2 year fixed term savings account from RCI Bank isn't far from market leading interest at 4.9% AER fixed. With a two year tern it's a good option for planned purchases, but it does reuqire £1,000 to open."
Pros and cons
Pros
  • Competitive interest rate
  • Cons
  • £1,000 minimum deposit
  • Withdrawals or closure isn't permitted during the term
  • Account details
    No withdrawals or closure permitted during term.
    Eligibility
    Minimum Initial Deposit
    £1,000
    Maximum Initial Deposit
    £1,000,000
    Permanent UK Resident

    Our best three-year fixed rate bond

    Our editors picked this deal by weighing several factors such as the interest rate, term, withdrawal conditions, minimum opening balance and others for this product.

    Card
    RCI Bank 3 Year Fixed Term Savings Account
    3 years
    Term
    4.65%
    AER fixed
    £1,000
    Open with
    FSCS
    Protection scheme
    How we score our products
    Expert verdict
    4.8/5
    Apply now
    Salman Haqqi, our savings expert says..
    "This has a very competitive rate of % and it's fixed for three years. With interest rates expected to fall in the second half of the year, this is a great option to lock in an inflation beating rate for next three years. You can open the account by depositing £1,000 up to £1m and the interest is either paid monthly or annually."
    Pros and cons
    Pros
  • Competitive interest rate
  • Fixed interest rate for 3 years
  • Cons
  • Requires £1,000 to open
  • Account details
    No withdrawals or closure permitted during term.
    Eligibility
    Minimum Initial Deposit
    £1,000
    Maximum Initial Deposit
    £1,000,000
    Permanent UK Resident

    Pros and cons

    Pros

    Peace of mind that your money is working for you
    Guaranteed interest rate for the term of the bond
    Fixed rate bonds are virtually risk-free

    Cons

    You lose access to your money for the term of the bond
    You have to pay in a lump sum
    You might lose out on the best rate if interest rates rise

    What happens at the end of the fixed term?

    When the term ends, the bond is said to have matured. Typically, your bank or building society will contact you long before the bond reaches maturity. They will ask what you want to do with your money when the term ends and give you some options to consider.

    In most cases, your provider will give you a selection of options to choose from. These could include:

    • Reinvesting the money in a new bond

    • Setting up a new bond with your existing funds and adding an additional amount

    • Reinvesting a proportion of the bond and withdrawing the rest

    • Closing your account and withdrawing all your savings

    Interest earned on £1,000 at the end of the term with a 1, 2 or 5-year fixed-rate bond
    Type of accountInterest earned at the end of the term before tax (£1,000 deposit)
    1 Year Fixed Rate Bond (5.25%)£52.50
    2 Year Fixed Rate Bond (4.75%)£96.73
    5 Year Fixed Rate Bond (4.16%)£223.88

    Source: Derived from data from Defaqto, updated March 19, 2024

    How do you withdraw from a matured fixed rate bond?

    If your fixed rate bond has matured and you've chosen to cash in your money, follow these three steps.

    • Complete the form provided by your bank

    • Wait while your bank transfers the money into your account

    • Decide what you want to do with your money

    If you decide on reinvesting your money, it's a good idea to compare the latest rates on offer for a new fixed-rate bond, or consider other types of savings accounts or investing products.

    You could also speak to a financial adviser for further guidance on what to do.

    Median monthly savings per UK household[1]
    £180

    Are fixed rate bonds safe?

    With a fixed rate bond you’re locking away your money at a fixed rate for a set period. So there is a chance that interest rates may rise during that term, you may not end up earning the best rate possible over the full term of the deal.

    At the same time, your original investment may not hold its value in real terms if the interest you’re getting is less than the rate of inflation over the investment period.

    The resulting impact of those circumstances may affect your eventual return on investment, but it isn’t nearly as significant as losing the entirety of your investment.

    The latter scenario is also highly unlikely as fixed rate bonds are protected under the Financial Services Compensation Scheme (FSCS) up to a maximum of £85,000.

    If you plan on investing more than that, it's best to split any amount over £85,000 with another bank or provider. Just be sure that the new bank or provider doesn't operate under the same banking licence as your other accounts.

    FAQs

    What is our highest interest rate for a fixed rate bond?

    Our best interest rate for a fixed rate bond is currently 5.06%.

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

    In terms of how much money you need to open a fixed rate bond, you can open most fixed rate bonds with as little as £1 and as much as £5,000.

    Can I open a fixed rate bond online?

    Yes, you can open a fixed rate bond online. Just like any savings account, you can open a fixed-rate bond online, or by visiting a bank or building society branch.

    Can I have more than one fixed rate bond?

    Yes, you can have more than one fixed rate bond but make sure you keep some money accessible in case of an emergency. Read this guide for help choosing the right savings account.

    Can I have a fixed rate bond if I have bad credit?

    Yes, you can have a fixed rate bond if you have bad credit as your finances are not checked when you open a savings account. If you need help choosing the right savings account, read this guide.


    Can I withdraw my money before the term ends?

    You may be able to withdraw your money before the term ends, but you'll likely have the pay a penalty. Typically this amount any interest you've earned on your money. It's worth checking the terms and conditions of your fixed rate bond before you sign up.

    Do you have to pay tax on the interest earned from a fixed rate bond?

    You only have to pay tax on any interest you have earned from a fixed rate bond if it exceeds your Personal Savings Allowance.

    However, those earning £17,570 or less also qualify for the "starting rate", which could give you up to an extra £5,000 savings allowance depending on your income.

    Under current rules, those earning £12,750 would be eligible for the full £5,000, but this entitlement decreases by £1 for each additional £1 you earn in income.

    Learn more about savings accounts

    From how to choose the right savings account to understanding the tax-free benefits of ISAs, we've got you covered.
    What's the best place for your money?
    What's the best place for your money?
    What is a Help to Save account?
    What is a Help to Save account?
    Are cash ISAs still worth it?
    Are cash ISAs still worth it?

    About the author

    Salman Haqqi
    Salman Haqqi spent over a decade as a journalist reporting in several countries around the world. Now as a personal finance expert, he helps people make informed financial decisions.

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    References

    1. NimbelFins: Average Household Savings & Wealth UK 2023