Coronavirus - Get the latest updates and resources from MyWalletHero - Find out more.
Advertiser Disclosure

The Best Fixed Rate Bonds

Updated: 28th May 2020

If you want to boost the rate on your savings, fixed rate bonds could be a good choice. In exchange for tying up your money, you can get rates higher than the typical current account or easy access savings account.


Offers from our affiliate partners appear first and are ordered from highest rating to lowest, followed by other top-rated offers. You can read more about our ratings and page sort here. Offers from affiliate partners are marked with *

Here are MyWalletHero’s picks for the fixed rate bonds:

Great for: Very competitive fixed rate interest
5 stars question mark

If you’re looking for a great interest rate, and the ability to deposit a large sum in multiple payments, this 3 Year Fixed Term Savings account from RCI Bank could be a great option. You’ll get a very competitive rate of 1.55% with this account, and can make as many deposit payments within your first 14 days as you like. The minimum amount per deposit is £1,000, which is fairly standard across similar fixed rate accounts out there.

HIGHLIGHTS

  • Minimum deposit £1,000
  • Maximum total balance £1,000,000
  • Deposit must be made within 14 days of opening, but can be done via unlimited payments
  • Annual or monthly interest options available
  • Interest Rate (AER):

    1.55%
  • Account Type:

    3 Year Fixed Rate
  • Protection Scheme:

    FSCS
  • Account Minimum:

    £1,000

what we like

  • Unlimited deposit payments with the first 14 days of opening (up to £1 million)
  • Option for annual or monthly interest payments
  • Very competitive interest rate

HIGHLIGHTS

  • Minimum deposit £1,000
  • Maximum total balance £1,000,000
  • Deposit must be made within 14 days of opening, but can be done via unlimited payments
  • Annual or monthly interest options available
  • DISCLAIMER

Great for: Highly competitive fixed rate interest
5 stars question mark

Boasting a whopping 1.80% interest rate, this 5 Year Fixed Term account from RCI Bank offers an eye-catching rate for the current environment. It’s not just the interest rate that makes this account worth considering — you can deposit up to £1 million, which is much higher than some offerings. You also have 14 days to make unlimited deposits into the account (with a minimum of £1,000 a time).

HIGHLIGHTS

  • Minimum deposit £1,000
  • Maximum total balance £1,000,000
  • Deposit must be made within 14 days of opening - but can be done via unlimited payments
  • Annual or monthly interest options available
  • Interest Rate (AER):

    1.80%
  • Account Type:

    5 Year Fixed Rate
  • Protection Scheme:

    FSCS
  • Account Minimum:

    £1,000

what we like

  • Highly competitive interest rate
  • Unlimited deposit payments within the first 14 days of opening (up to £1 million)
  • Option for annual or monthly interest payments

HIGHLIGHTS

  • Minimum deposit £1,000
  • Maximum total balance £1,000,000
  • Deposit must be made within 14 days of opening - but can be done via unlimited payments
  • Annual or monthly interest options available
  • DISCLAIMER

Great for: Competitive interest on fixed term savings
5 stars question mark

This 2 Year Fixed Term account from RCI Bank offers a competitive interest rate of 1.45%. But it’s not just the interest rate that makes this account worth considering. For one, the account allows you to make as many deposits as you like in the first 14 days (each must be £1,000 or more). Plus, it’s a good fit for savers with more to deposit, as the maximum deposit is £1 million.

HIGHLIGHTS

  • Minimum deposit £1,000
  • Maximum total balance £1,000,000
  • Deposit must be made within 14 days of opening, but can be done via unlimited payments
  • Annual or monthly interest options available
  • Interest Rate (AER):

    1.45%
  • Account Type:

    2 Year Fixed Rate
  • Protection Scheme:

    FSCS
  • Account Minimum:

    £1,000

what we like

  • Competitive interest rate
  • Unlimited deposit payments with the first 14 days of opening
  • Option for annual or monthly interest payments

HIGHLIGHTS

  • Minimum deposit £1,000
  • Maximum total balance £1,000,000
  • Deposit must be made within 14 days of opening, but can be done via unlimited payments
  • Annual or monthly interest options available
  • DISCLAIMER

Great for: Competitive fixed rate interest
5 stars question mark

This 1 Year Fixed Term account from RCI Bank offers a competitive interest rate of 1.25%. But it’s not just the interest rate that makes this account worth considering. The account also allows you to make as many deposits as you like in the first 14 days (each must be £1,000 or more) – and you can choose between annual or monthly interest payments.

HIGHLIGHTS

  • Minimum deposit £1,000
  • Maximum total balance £1,000,000
  • Deposit must be made within 14 days of opening, but can be done via unlimited payments
  • Annual or monthly interest options available
  • Interest Rate (AER):

    1.25%
  • Account Type:

    1 Year Fixed Rate
  • Account Minimum:

    £1,000

what we like

  • Competitive interest rate
  • Unlimited deposit payments with the first 14 days of opening
  • Option for annual or monthly interest payments

HIGHLIGHTS

  • Minimum deposit £1,000
  • Maximum total balance £1,000,000
  • Deposit must be made within 14 days of opening, but can be done via unlimited payments
  • Annual or monthly interest options available
  • DISCLAIMER


In this section:

What is a fixed rate bond?

A fixed rate bond is a type of savings account where you receive a guaranteed rate of interest for a set period of time. With this type of account your money is locked away for a specified term. This means you won’t be able to access your money during this time.

As a general rule, the longer your money is locked away for, the better the interest rate you can achieve. This is because banks and building societies use your money for their own funding purposes for the duration of your bond’s term. So, in return for the level of security you provide by not accessing your money for a specified period of time, banks and building societies are willing to give you a higher rate of interest on your account.

A fixed rate bond is one of the best ways to secure a decent amount of interest on a large pot of money. However, as you aren’t able to access your savings during the bond’s term, it is generally a good idea to have an easy access savings account as well for your ‘emergency fund’.

What are the benefits of a fixed rate bond?

There are several benefits to having a fixed rate bond. Let’s take a look:

Guaranteed interest rate – One perk of a fixed rate bond is that you have a guaranteed rate of interest for the duration of the bond’s term. This means you can calculate exactly what you will earn from your savings pot. And your interest rate is protected from any downturn in the market.

Higher rate of interest – A fixed rate bond usually offers a higher rate of interest when compared to the likes of an easy access account. Banks and building societies reward savers for locking their money away for a set period of time. The longer the term of the bond, the higher the rate of interest tends to be.

Minimal risk – As a fixed rate bond is a savings account and not a type of investment product, there is minimal risk to your money. The bond is protected by the Financial Services Compensation Scheme (FSCS).

What different terms are available?

Terms of varying lengths are available when it comes to a fixed rate bond. Typically, the longer you tie your money up for, the higher the rate of interest you can achieve. Just make sure you calculate how long you can realistically afford to lock your money away for.

The most common fixed rate bond terms range from one year to five years.

If you are looking for a shorter-term bond, you can find some as short as one to three weeks, or one to 18 months. But the likelihood is that you will achieve a better rate of interest with a longer-term bond.

Bonds that last more than five years are also available. But if you are interested in a term this long, it is best to talk to a financial advisor. They will be able to talk you through your investment options and help you to decide whether locking your money away for a long period of time is the best choice for you.

How does a fixed rate bond work?

In order to open a fixed rate bond you will need to make a deposit. Bonds have varying minimum and maximum deposits. Minimum deposits can range from £1 to £50,000, while maximum deposits can be as high as £2,000,000.

It is important to know if there are any limits on the amount you deposit, as once the deposit is made, you usually can’t add to it. There are some bonds that will allow further deposits for a limited time (referred to as ‘while the issue is open’), but for most, that first deposit will be your only one.

Once you have deposited your money, your interest will be calculated as a yearly percentage. Depending on your chosen bond, interest can be paid monthly or annually.

You can choose to have your interest paid into a nominated account or added to your savings. If it is added to your savings, you will benefit from compound interest but you won’t be able to access that money until the end of your fixed term.

Once your bond reaches maturity, you can choose to withdraw your money and close your account. Alternatively, you can choose to re-invest your money in another bond or move it to a variable rate savings account. Your provider should write to you when your bond is reaching maturity, but if they don’t, make sure to contact them to let them know what you want to do.

Can you lose money on fixed rate bonds?

While the big benefit of a fixed rate bond is that you can achieve a guaranteed rate of interest, there is a downside in that you can be penalised if you need to access your money before the end of the term.

For most fixed rate bonds you won’t be able to take money out of the account during the fixed term. If you do make any withdrawals, this could carry a penalty charge in the form of loss of interest. This is either a flat penalty rate (e.g. 90 days’ loss of interest), or it could be a tapered penalty rate (e.g. 365 days’ loss of interest if the withdrawal is in the first year, 300 days’ loss of interest if the withdrawal is made in the second year, and so on).*

It’s not only a penalty charge that could lose you money with a fixed rate bond. The flip side of a guaranteed rate is that you won’t benefit if interest rates increase. So you could lose out on potential returns for locking your money away in one bond for a set period of time.

*During the ongoing coronavirus pandemic, some banks and building societies are offering penalty-free access. This would be something to check before opening a bond.

Are my savings protected in a fixed rate bond?

As fixed rate bonds are savings accounts, they are protected by the Financial Services Compensation Scheme (FSCS). Being covered by the FSCS means that savings up to £85,000 are protected if the financial institution providing the bond fails.

It is important to note that this is £85,000 per financial institution. So you could have multiple bonds with different banks, and as long as none of the bonds exceed the threshold, your money will be protected.

One other thing to note is that if you choose to have your interest paid back into your bond, you should make sure that this doesn’t push your balance over £85,000.


The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. The Motley Fool has recommended shares in Lloyds, Tesco and Barclays.