Find our best fixed rate bonds
Get a higher interest rate of up to 5.65% with a fixed rate bond
What are fixed rate bonds?
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.
This savings account holds your money for a set period of time"
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.
Read more about whether you should opt for a fixed rate bond or a savings account.
How to choose a fixed rate bond
Evaluate your funds
Decide on a timeframe
Compare interest rates
Check all the terms and conditions
Our best one-year fixed rate bond
Our editors pick these deals by weighing several factors such as the interest rate, term, withdrawal conditions, minimum opening balance and others for each product.
This one year bond can be opened with a minimum deposit of £1,000 and a maximum of £85,000. It's a good option for those looking to lock money away for a large purchase in a year's time.”
Withdrawals are not permitted during term.
| Gross rate | |
|---|---|
| Including bonus | Excluding bonus |
| 3.01% | 3.01% |
| AER rate | |
| Including bonus | Excluding bonus |
| 3.01% | 3.01% |
Our best two-year fixed rate bond
Our editors pick these deals by weighing several factors such as the interest rate, term, withdrawal conditions, minimum opening balance and others for each product.
Interest rates are still competitive in the savings market, so take advantage of 5.3% AER fixed for the next two years. This account can also be opened with £1,000, so fixed-term accounts don’t always need a huge savings pot to get started.”
No withdrawals or closure permitted during the term of the account.
| Gross rate | |
|---|---|
| Including bonus | Excluding bonus |
| 5.3% | 5.3% |
| AER rate | |
| Including bonus | Excluding bonus |
| 5.3% | 5.3% |
Our best three-year fixed rate bond
Our editors pick these deals by weighing several factors such as the interest rate, term, withdrawal conditions, minimum opening balance and others for each product.
This has a very competitive rate of 5.2% and it’ll be locked in for three years. You can open the account by depositing £1,000 up to £1m and the interest is either paid monthly or annually.”
No withdrawals or closure permitted during term.
| Gross rate | |
|---|---|
| Including bonus | Excluding bonus |
| 5.2% | 5.2% |
| AER rate | |
| Including bonus | Excluding bonus |
| 5.2% | 5.2% |
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.
"It's important not to rush into a decision. Think carefully about which option works best for you. If you need to, consult a financial advisor to get tailored advice."
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
| Type of account | Interest earned at the end of the term before tax (£1,000 deposit) |
|---|---|
| 1 Year Fixed Rate Bond (6.10%) | £62.73 |
| 2 Year Fixed Rate Bond (6.05%) | £128.28 |
| 5 Year Fixed Rate Bond (5.95%) | £345.50 |
Source: Derived from data from Defaqto, updated September 21, 2023
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.
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.
Pros and cons
Pros
Cons
Jargon buster
BOE base rate
The Bank of England base rate, sometimes known as the bank rate or base interest rate, is the most important interest rate in the UK. The Bank of England uses it to control inflation (the cost at which everyday things - such as food, fuel, and clothing - rise). And other financial institutions use it as a guide for the interest rates on their savings accounts and loans.
The BOE’s goal is to keep inflation as close to 2% as possible, so it changes the base rate if prices fall or rise by too much or too sharply.
The current Bank of England base rate is 5.25%.
FCA
The Financial Conduct Authority (FCA) regulates the financial services industry to ensure firms stick to the rules and consumers do not fall victim to scams or get tied into unfair contracts.
Variable rate
A variable rate of interest on your savings account means that it may go up or down during the term of your account. Often, the changes will be pegged to a financial indicator such as the Bank of England base rate.
Fixed rate
This term is used to describe savings accounts that deliver a set interest rate over a given term. The interest rate and how long it lasts are agreed when you sign-up for the account.
Gross Interest
This is the interest paid on a savings account before income tax deductions.
Maturity
When your account reaches maturity, it means that the fixed term has come to an end. For example, if you have a 5-year fixed rate bond, your account matures on the day the 5-year fixed term ends.
AER
The Annual Equivalent Rate (AER) tells you how much interest you would receive if you left your money in a particular savings account for a full year, taking into account compound interest.
Financial Services Compensation Scheme (FSCS)
The FSCS is a government-backed program that protects your money and compensates you if your bank, building society, or savings provider goes bust.
It covers up to £85,000 - or £170,000 for joint accounts - held in each official UK financial institution. It also provides cover for other sorts of financial products such as debt management, funeral plans, insurance, credit unions, investments, mortgages and pensions.
There are several banking groups in the UK, but if you have a total of £85,000 or less with any of them, all your money will be returned to you in the event of each bank or building society in the group collapsing. Other types of institutions have different limits. You can check them all on the FSCS website.
FAQs
What is our highest interest rate for a fixed rate bond?
Our best interest rate for a fixed rate bond is currently 5.65%.
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.
About the author
Didn’t find what you were looking for?
Below you can find a list of our savings pages:
Investment pages (capital at risk):
Customer Reviews
I wanted a lot of extras like curtesy …
Easy site to navigate and quick and…
Purchased
We’ve been featured in
