Best fixed-rate bonds: Today’s latest rates

Fixed-rate bonds are savings accounts that lock away your funds for a set period of time, paying a guaranteed set rate of interest throughout the term.

They commonly span from nine months to five years and, in theory, the longer the term you commit to, the higher the interest rate you receive. However, this is not always the case – during times when rates are expected to fall over the longer term, savings providers will increase rates for shorter-term bonds in a bid to avoid paying over the odds in future.

If you need to make a withdrawal before the end of the term, you may be unable to – providers that do allow early access may impose a penalty by removing some of the interest you have earned thus far, so be certain you do not need the funds before opening your account.

You will often need to pay in a lump sum at the start of the term, rather than making regular deposits. The interest can be paid annually, quarterly or monthly, depending on your provider. In some cases, interest may only be paid at the end of the term – if you have a large amount saved over a number of years, this could mean you will exceed your personal savings allowance and have to pay tax on your returns.

If your provider is covered by the Financial Services Compensation Scheme, then your money is protected up to £85,000 per person, per financial institution should your provider go bust.

This guide will cover:

• How we determine the best rates
• The best fixed-rate bonds
• Expert opinion: Things to consider when choosing a fixed-rate bond
• Fixed-rate bond FAQs

How we determine the best rates

The Best Buy tables show the best savings rates widely available in the market. This means certain accounts are excluded, including those that require minimum deposits of more than £25,000 or are available only to local or existing customers.

The data in these tables is provided by Savings Data Limited and is compiled using automated tracker tools and updates from savings providers. Savings Data Limited then manually checks the information and enters it into a database that feeds the live tables, which update daily.

The savings accounts shown are protected by the Financial Services Compensation Scheme. The information in this article is intended for information purposes and should not be taken as endorsement or advice.

The best fixed-rate bonds

Use the table below to explore your options for a fixed-rate deal.

For the top rates where you can access your cash whenever you like, see our guide to the best easy access accounts and the best current accounts.

Alternatively, our guide to the best notice accounts can show you the top accounts that require you to wait a little while before your money is released.

While you’re saving, you might be keen to shield your money from a potential tax bill – our guide to the best cash Isas can help you find a tax-efficient account.

Expert opinion: Things to consider when choosing a fixed-rate bond

Rachel Springall, of the analyst Moneyfactscompare.co.uk, said: “Picking the right fixed bond term entirely depends on someone’s circumstances and how soon they wish to access their pot. There are bonds with fixed terms of just a few months, so these might be useful for someone who has a big lump sum but may need to use it before the year is over, such as a deposit for a home.

“There are fixed bonds available that pay interest monthly, which may be suited to customers looking to supplement their income.”

She also warned customers to consider the personal savings allowance (PSA) when it came to accounts that were not Isas, as there could be tax to pay on the interest you earn.

Fixed-rate bonds are worth considering at the moment, due to expected falls in the Bank of England’s Bank Rate, which tend to encourage savings providers to reduce rates.

“Interest rates are expected to fall further in the coming months, so some savers might want a longer-term fixed bond to secure a guaranteed return for longer. Some fixed bonds require large sums upfront and most fixed accounts do not allow early access, so it’s worth taking time to compare deals carefully before investing.

“As it stands, some of the top rates available are from challenger banks, which should not be overlooked,” Ms Springall added.

Fixed-rate bond FAQS

Do you pay tax on a fixed-rate bond?

You might have to pay tax on the interest your fixed-rate bond earns if it exceeds your tax-free allowance, unlike the money stored in an Isa.

This allowance depends on your tax bracket; basic-rate taxpayers can earn £1,000 in interest tax-free but the limit is £500 for higher-rate taxpayers and no PSA for additional-rate taxpayers.

Those with incomes of less than £17,570 may be able to benefit from the additional starting rate for savings, which gives those on lower incomes up to £5,000 as an extra tax-free savings allowance.

If you usually pay tax by self-assessment, you will be asked to detail the amount of savings interest you have earned over the tax year. If you pay tax via Pay As You Earn (PAYE), any tax on savings interest is usually calculated automatically and your tax code may be adjusted if you have tax to pay.

You must submit a tax return if you earn more than £10,000 in savings interest – regardless of whether or not you usually file one.

What is a good interest rate on a bond?

This will depend on what rates are available at the time you are looking for a bond, as well as whether the account suits your circumstances.

The best way to determine how “good” an interest rate is, is to see how it compares with other similar types of bond on the market. If it can easily be beaten by other providers, it might be worth looking elsewhere.

Our table of the best fixed-rate bonds above shows some of the top deals currently available.

Are Premium Bonds a good investment?

NS&I’s Premium Bonds are not fixed-rate bonds – and they work slightly differently to other types of savings accounts.

They do not pay any interest, instead every £1 you have invested is assigned its own Premium Bonds number, which is entered into a monthly prize draw, whether you could win between £25 and £1m. Our guide to Premium Bonds explains how they work in more detail.

NS&I does offer fixed-rate bonds, including Guaranteed Growth Bonds and Guaranteed Income Bonds – see our guide to NS&I savings accounts to find out more.