Compare our best fixed rate bonds

A fixed rate bond is a type of savings account that requires you to lock away a lump sum of cash for a set time. Account terms typically range from six months to five years, although you may find shorter or longer terms with some providers.

You can’t usually withdraw your cash during this period, but the account pays a fixed rate of interest in return. This means that if the Bank of England base rate falls, your savings rate doesn’t – but on the other hand, you don’t see any benefit if the base rate rises.

Usually, when you open a fixed rate savings account, you have around 10 to 14 days to pay money into the account. Minimum deposit requirements tend to range from £500 to £1,000, although this varies between providers. Once that funding window closes, you can’t make any additional deposits.

Unlike easy access savings accounts, you can’t withdraw money held in a fixed rate bond during the term. Some providers might let you close your account early, but this usually leads to a penalty fee – often in the form of a loss of interest.  

You may find that fixed rate bonds pay higher interest rates compared to other account types, with the longest terms potentially paying the most competitive rates. Because it’s a fixed rate, you know exactly how much interest you’ll earn during the term of the account.

The key differences between fixed rate bonds and many other savings accounts are as follows:

• A fixed rate account lasts for a set term only, usually between six months and five years

• You receive a guaranteed rate of interest for the term of the account

• You can’t access your money early without paying a penalty

• You can’t top up your balance during the term of the account

You can often open a fixed rate savings bond online, over the phone or in branch. You must usually fill in a form, providing some personal details and your proof of ID and address. 

Once you’ve opened your account, you must deposit your funds within the specified time frame.

Just before the fixed rate term ends or matures, your provider should get in touch with you to outline your options. These typically include:

• Closing the account and transferring your lump sum, plus the interest earned, into a linked savings account

• Reinvesting the money into a new fixed rate bond

• Reinvesting some of your money into a new fixed rate bond and withdrawing the rest

If you don’t respond to your provider, or if your provider doesn’t get in touch with you, it may automatically transfer your funds to an instant access account, and you can choose what to do with your money from there.

If you're prepared to lock your money away for the medium to long term, and you're looking for a savings account where your cash can grow tax-free, then you could consider an Individual Savings Account (ISA).

You could put your money into a stocks and shares ISA or a cash ISA, or a combination of both. If you want to put your money into an account without any stock market investment, a cash ISA could be the best option.