We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
Table: sorted by interest rate, promoted deals first
You could earn more on your savings by locking your money away for a period of time in a fixed-rate bond rather than putting it in an easy-access account. But while you’ll benefit if rates go down in the market as a whole, you could earn less than you would have done elsewhere if rates go up and you won’t have access to your money, so you need to consider whether a fixed-rate bond is right for you before you take one out.
How do fixed-rate bonds work?
Once you’ve compared and picked the fixed-rate savings account you want to open, things are pretty straightforward.
- Application. With most financial institutions, you can apply online by putting in your data and going through an ID check. Some financial institutions don’t allow you to open a fixed-rate savings account with them if you don’t have a current account too. If the account you want to open is with a bank you’re already a customer of, you can often do it directly from your banking app.
- Deposits. Once the account is open, you have a short period of time to fund it (normally less than one month). After that, you can’t make any more deposits or withdrawals to your account until it matures. If you really do have to access the funds, it may be a slow process and you’ll incur a penalty (usually forfeiting interest earned).
- Interest. The interest will either be paid out “on maturity” when your lump sum’s released, or, in some cases, interest can be “paid away” monthly to an account that you nominate. It’s more lucrative in the long run if the interest is allowed to compound in the bond itself itself, but some people will be looking to generate a monthly income instead.
- Withdrawals. We can’t stress it enough: only put money into a fixed-rate savings account if you’re 100% sure you won’t need to access it. Because no. You. Cannot. Withdraw. Your. Deposit. In. Advance. More precisely, in some cases, you just can’t at all; in others, you’ll be charged a fee and your account will be closed.
- When the account matures. You’ll be able to access your money and you usually can choose to have it paid back into your current account (and then potentially look for a new deal) or “renew” your current deal by opening a new fixed-rate bond with the same financial institution. There’s no guarantee you’ll get the same interest rate as before though.
How long should I keep my money in a fixed-rate bond for?
While the duration of the fixed-rate bond may vary from bank to bank, generally the periods of time that you can put your money in a bond for are 6 months, 1 year, 18 months, 2 years, 3 years or 5 years.
If you think that savings interest rates are likely to rise over the coming months and years, then you might prefer to fix for a shorter time. Conversely, if you think that savings interest rates are coming down, then you might be keen to fix at today’s rates for as long as you can. For larger sums or longer terms, a bit of research in where rates are headed can be time well spent.
Bear in mind that the longer you lock your money away for, the greater the chance that your circumstances could change, and you might wish you could access your money. So if you think your circumstances could well change, consider a shorter term, or locking less away. Of course you generally can withdraw your savings in any case, but if you do so before the end of the fixed-term, you’ll incur a penalty (typically losing your interest).
How to choose the best fixed-rate bonds
If you do decide that a fixed-rate savings account is what you need, comparing and picking the right one for you shouldn’t be excessively complicated. Here’s how to tackle it:
- How long can you do without the money? A longer period generally means a better rate (with the caveat that rates could rise when your money’s locked in).
- Compare rates. Obviously, the higher the better.
- Check the eligibility criteria. Make sure you can apply for the account you’re looking at. With some banks, you’ll need to open a current account first. Also, keep in mind that many fixed-rate savings accounts have a minimum deposit (this could be £50 to £500 or more).
- Look at where/when the interest is paid. Monthly, annually or at the end? Into the account itself or somewhere else?
- How much are you going to earn? This will basically depend on the interest rate, but to make a final decision it’s worth trying to figure out how much you’ll get out of the account with the amount you can afford to put aside.
- What’s the withdrawal penalty? While it’s a bad idea to withdraw savings from a fixed-rate account before it matures, make sure you understand whether it’s possible to take your money early and the penalty for doing so.
Are fixed-rate savings bonds safe?
Yes, they generally are, providing they’re issued by a UK-authorised bank or building society and you’re saving below £85,000. Always make sure that the deal you’re looking at is covered by the FSCS (Financial Services Compensation Scheme), which will protect your deposits up to £85,000 if the financial institution providing the account were to go bankrupt. If you have more than £85,000 in savings, it’s advisable to spread it between accounts at different financial institutions, just in case.
Unlike some investment products where your investment can go down as well as up, fixed-rate bonds guarantee a set return. This might not match the rate of inflation, but it’s better than sticking your money under the mattress.
Which are the best fixed-rate bonds at the moment?
Our best fixed-rate bonds are the highest interest rates available for each type of bond we specify. To get the latest rates, we use Moneyfacts data, which covers nearly the full market of savings products and is checked and updated daily. We don’t include accounts from private banks.
All the bonds in our list have savings protection – for most, this is the Financial Services Compensation Scheme (FSCS). Other schemes include that of NS&I, which is 100% backed by HM Treasury, and the Gibraltar Deposit Guarantee Scheme.
Bottom line
You can usually get better rates of interest by putting your money into a fixed-rate bond versus other types of account but you need to be able to lock your money away for the term of the bond. However, if interest rates go up during this period, you could end up losing out in the long run.
If you’re able to invest long term – for at least five years – you could consider investing in the stock market instead but there’s a risk that the value of your investment could go down instead of up. It’s a good idea to speak to an independent financial adviser before you decide to do this.
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