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The best fixed rate savings accounts

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Last updated on

12 September 2014

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23 Comments

If you want to earn more interest by locking up your savings, take a look at these top fixed rate accounts.

When it comes to savings accounts, many of us prefer the option of an easy access account so we don’t have to worry should we need to get our hands on our cash in an emergency.

However, you’ll generally get a better rate of interest if you’re prepared to lock away your money for a year or more in a fixed rate bond. A fixed term bond is just like an ordinary savings account, except you can't touch your money for a set period of time.

Interest rates on shorter-term bonds are slowly increasing and easily beat the top easy access accounts.

And with the Bank of England indicating that interest rates are likely to stay low for the foreseeable future, if you don't like the riskier options then there's definitely an argument for locking your money away in a fixed-rate account, at least for the short term.

All of the bonds listed below are with providers who participate in the Financial Services Compensation Scheme, which guarantees the first £85,000 of your savings should the provider go bust.

One-year and 18-month bonds

Account 

Interest rate (AER) 

Minimum deposit 

Access 

Castle Trust One-Year Fortress Bond^

2.25%

£1,000

Online

United Trust Bank 18-Month Bond

2.15%

£500

Online, post

United Trust Bank 15-Month Bond

2.10%

£500

Online

Bank of Cyprus 18-Month UK Bond

2.10%

£1,000

Online, branch, post, phone

Bank of Cyprus 15-Month Bond

2.00%

£1,000

Online, branch, post, phone

Islamic Bank of Britain 18-Month Fixed Term Deposit*

2.00%

£1,000

Online, branch, post, phone

Bank of London and the Middle East Premier Deposit Account*

2.00%

£25,000

Online

United Trust Bank 12-Month Bond

1.95%

£500

Online

Islamic Bank of Britain 12-Month Fixed Term Deposit*

1.90%

£1,000

Online, branch, post, phone

National Counties Building Society One Year Savings Bond

1.90%

£10,000

Online, branch, post

*Anticipated profit rate

^Lower level of FSCS protection

You'll notice some of the accounts offer an anticipated profit rate. This is because they are run according to Sharia law, which forbids the payment of interest.

Two-year bonds

You can get better rates by locking your cash up for longer in a two-year bond.

Account 

Interest rate (AER) 

Minimum deposit 

Access 

Castle Trust Two Year Fortress Bond^

2.75%

£1,000

Online

Newcastle BS Two-Year Fixed Rate Bond

2.35%

£500

Online, branch, post

United Trust Bank Two-Year Bond

2.35%

£500

Online

Investec Two-Year Fixed Term Deposit

2.35%

£25,000

Online, post

SecureTrust Bank Fixed Rate Bond

2.33%

£1,000

Online

Islamic Bank of Britain Fixed Term Deposit*

2.30%

£1,000

Online, branch, post, phone

State Bank of India Fixed Term Deposit

2.25%

£10,000

Online

Bank of London and the Middle East Premier Deposit Account*

2.25%

£25,000

Online

United Bank Two-Year Fixed Term Deposit

2.2%

£2,000

Online, branch, post

Bank of Cyprus UK Bond

2.15%

£1,000

Online, branch, post, phone

*Anticipated profit rate

^Lower level of FSCS protection

Three-year bonds

Now let’s now take a look at how the three-year bonds are shaping up.

Account

Interest rate (AER) 

Minimum deposit

Account access

Shawbrook Bank Three-Year Fixed Rate Bond

2.75%

£5,000

Online, post

Aldermore Three-Year Fixed Rate Account

2.70%

£1,000

Online, post, phone

United Bank Three-Year Fixed Term Deposit

2.70%

£2,000

Online, branch, post

Investec Three-Year Fixed Term Deposit

2.65%

£25,000

Online, post

Vanquis Bank High Yield Bond

2.55%

£1,000

Online

United Trust Bank Three-Year Bond

2.50%

£500

Online, post

Bank of Cyprus Three-Year Fixed Rate Bond

2.50%

£1,000

Online, branch, post, phone

Market Harborough BS Three-Year Fixed Term Bond

2.50%

£1,000

Online, branch, post, phone

Yorkshire BS Fixed Rate E-Bond

2.50%

£1,000

Online

Chelsea BS Fixed Rate E-Bond

2.50%

£1,000

Online

Four- and five-year bonds

These longer term bonds are more risky. As the term of the account is at least four years, there’s a bigger chance that market interest rates could move against you. In other words a five-year account paying 3.10% may look attractive now, but you might be a bit fed up if rates went up and the top instant access accounts were paying 4% in 2016.

With that warning out of the way, here are the top-paying bonds over four and five years.

Account

AER

Term

Minimum deposit

Account access

Castle Trust Five Year Fortress Bond^

4%

Five years

£1,000

Online

Vanquis Bank High Yield Bond

3.21%

Five years

£1,000

Online

United Bank UK Five-Year Fixed Term Deposit

3.20%

Five years

£2,000

Online, branch, post

Shawbrook Bank Five-Year Fixed Rate Bond

3.20%

Five years

£5,000

Online, post

Tesco Bank Fixed Rate Saver

3.10%

Five years

£2,000

Online, phone

Aldermore Bank Five Year Fixed Rate Account

3.10%

Five years

£1,000

Online, post, phone

FirstSave Fixed Rate Bond

3.08%

Five years

£1,000

Online

Bank of London and the Middle East Premier Deposit Account*

3.00%

Five years

£25,000

Online

Vanquis Bank High Yield Bond

2.96%

Four years

£1,000

Online

SecureTrust Bank Fixed Rate Bond Four-Year Term

2.92%

Four years

£1,000

Online

Aldermore Bank Fixed Rate Account

2.90%

Four years

£1,000

Online, post, phone

*Anticipated Profit Rate

^Lower level of FSCS protection

Longer-term bonds

If you want even greater returns you could lock your money in for seven years with SecureTrust Bank and get 3.2% or FirstSave and get a 3.5% return.

While you might end up on an uncompetitive rate in the next few years, at least you'll have had some money coming in over the short term.

Decisions, decisions

Ultimately, deciding how long to tie up your funds is up to you. As we mentioned at the top, you need to weigh up whether the rate of interest you’ll be earning is worth locking away your funds for several years.

You should also bear in mind that in the majority of cases, you won’t be able to make additional deposits once you’ve opened your fixed-rate bond – so again, this may put you off tying up your funds for too long. As always, make sure you read the terms and conditions carefully.

Finally, don’t forget about tax-free savings. You can also lock away your money in a fixed rate Cash ISA (or opt for an easy access Cash ISA if you prefer) and you won’t have to pay tax on any interest you earn.

You could earn much more by lending your money via peer-to-peer websites, which cut out the middlemen – the banks and building societies.

And if you don't have too much money to save, several current accounts offer a better rate of interest than even the top-paying fixed rate bonds. For a full round-up of the best rates on a host of cash savings options, take a look at Where to earn most interest on your cash.

Compare savings accounts

Compare Cash ISAs

This article is regularly updated to reflect the latest rates

More on savings:

The best instant access savings accounts

Where to earn most interest on your cash

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