What are fixed-rate bonds?
Fixed-rate bonds are a great way for savers to know exactly how much they will earn on their savings for a fixed amount of time. Most people save cash for different purposes, including short-, medium- and long-term goals. To secure a better interest rate on your interest-paying savings accounts, it makes sense to put any money you have earmarked for the longer term into a fixed-rate bond.
A fixed-rate bond is just a savings account in which your money is locked away for a set time period, with a guaranteed interest rate applied. Your money is out of reach for a while, but if you know you won’t need to access it for a while, you might as well make it work as hard as possible.
Generally speaking, the longer you can lock your money away, the better the rate you will get. You can choose from long- and short-term fixed-rate bonds. For example, a short-term bond might have a three- or six-month term, while a longer-term fixed-rate bond might run for between one and seven years. The amount of interest you can earn will also vary depending on the size of savings.
- Please note: Normal bank accounts are also paying high rates of interest at the moment. Compare bank account switching bonuses here.
What are the best fixed-term bond rates on the market?
Here are a few of the best deals around at the moment based on a £1,000 deposit. However, rates change quickly so do your own research using best buy tables.
- ICICI Bank UK SuperSaver Bond: AER 5.21%
- Mizrahi Tefahot Bank Ltd Flagstone – 3 Month Fixed Term Deposit: AER 5.12%
- Oxbury Bank Personal 3 Month Bond Account – Issue 1: AER 5.12%
- ICICI Bank UK HiSAVE Fixed Rate Account: AER 5.11%
- National Bank of Egypt (UK) LimitedRaisin UK – 6 Month Fixed Term Deposit: AER 5.06%
Pros and cons of fixed-rate bonds
Your money is safe in a fixed-rate bond as long as the provider is regulated by the Financial Conduct Authority, the watchdog for the financial services industry.
Up to £85,000 of your money per provider is protected under the Financial Services Compensation Scheme in the unlikely event your bank or building society goes bust. You can earn better rates than you would in an easy-access account.
However, most will have restrictions or penalty charges around withdrawals so you’re taking the risk that you won’t be able to get to your money if you suddenly need it.
Fixed-rate bond alternatives
The main disadvantage of fixed-rate bonds is that your money is locked away for a set period. There are other accounts on the market that offer high-interest rate, where you can still access your money One of the best ways to search the market for better interest rates than you get with easy access accounts is to use Hargreaves Lansdown’s Active Savings account where you can spread your savings around a range of providers who offer high-interest rates.
Here is a list of some of the best savings account offers on the market at the moment:
| Savings Platform | Highest Interest Rate | Savings Accounts | Minimum Deposit | FSCS Protected | GMG Rating | More Info |
|---|---|---|---|---|---|---|
 | 4.85% | 17 | £1,000 | ✔️ | See Rates | |
 | 4.9% | 64 | £1 | ✔️ | See Rates | |
 | 4.65% | 1 | £1 | ✔️ | See Rates | |
 | 4.88% | 67 | £10,000 | ✔️ | See Rates |
You may also be interested in these other types of savings accounts:
