The best fixed rate savings accounts

lovemoney staff
by Lovemoney Staff lovemoney staff on 17 April 2014  |  Comments 19 comments

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

The best fixed rate savings 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.

Unfortunately interest rates on bond savings accounts have plunged of late, and no short-term bonds beat inflation, although they easily beat the top easy-access accounts.

But with Bank of England Governor Mark Carney 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 more of an argument for locking your money away in a fixed-rate account, at least for the short term, than there was a few months ago.

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.

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

If you’re interested in investing in a fixed-rate bond but don’t want to tie up your money for too long, a one-year to 18-month fixed-rate bond might be right up your street.

Account

Interest rate (AER)

Minimum deposit

Access

Shawbrook Bank 18-Month Fixed Rate Bond

2.05%

£5,000

Online, post

Islamic Bank of Britain Sharia-Compliant 18-Month Fixed-Term Deposit*

2.00%

£1,000

Online, phone, post, branch

Bank of London and the Middle East 18-Month Fixed-Term Deposit*

2.00%

£25,000

Online, phone, post, branch

Shawbrook Bank One-Year Fixed Rate Bond

1.95%

£5,000

Online, post

Islamic Bank of Britain Sharia-Compliant 12-Month Fixed Term Deposit*

1.90%

£1,000

Online, phone, post, branch

Jordan International Bank One-Year Fixed Deposit Account

1.90%

£20,000

Online

Bank of London and the Middle East One-Year Fixed-Term Deposit*

1.80%

£25,000

Online

Britannia One-Year Fixed Rate Bond

1.71%

£1,000

Branch

Metro Bank 18-Month Fixed Term

1.70%

£500

Branch

*Anticipated profit rate

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

Close Brothers Two-Year Premium Gold Fixed Term Bond

2.40%

£10,000

Online

Shawbrook Bank Two-Year Fixed Rate Bond

2.30%

£5,000

Online, post

Islamic Bank of Britain Sharia Compliant Fixed-Rate Deposit*

2.30%

£1,000

Online, branch, post, phone

Shawbrook Bank Two-Year Fixed Rate Bond

2.30%

£5,000

Online, post

Bank of London and the Middle East Two-Year Fixed-Term Deposit*

2.25%

£25,000

Online

State Bank of India Hi Return Fixed Deposit

2.08%

£10,000

Branch, post

United Trust Bank Deposit Account

2.05%

£500

Branch, post

Britannia Fixed Rate Bond

2.05%

£1,000

Branch, post

ICICI HiSave Fixed Rate

2.05%

£1,000

Online

*Anticipated profit rate

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

Access

ICICI Bank HiSAVE Fixed Rate Account

2.70%

£1,000

Online, phone

Close Brothers Three-Year Premium Gold Fixed Term Bond

2.70%

£10,000

Online

Shawbrook Bank Three-Year Fixed Rate Bond

2.65%

£5,000

Online, post

Bank of London and the Middle East Three-Year Bond*

2.50%

£25,000

Online

State Bank of India Hi Return Fixed Rate Deposit

2.32%

£10,000

Branch, post

Britannia Thee Year Fixed Rate Bond

2.30%

£1,000

Branch, post

Nottingham BS Fixed Rate

2.30%

£1,000

Branch

*Anticipated profit rate

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, it's worth noting that rates on these bonds are starting to increase. So here are the top-paying bonds for four and five years:

Account

Term

Interest rate (AER)

Minimum deposit

Access

Shawbrook Bank Fixed Rate Bond

Five years

3.10%

£5,000

Online, post

Aldermore Bank Five-Year Fixed Rate Account

Five Years

3%

£1,000

Online, post, phone

Bank of London and the Middle East Five-Year Bond*

Five years

3%

£25,000

Online

Skipton BS Five-Year Fixed Rate Bond

Five years

3%

£500

Online

FirstSave Fixed Rate Bond

Five years

2.95%

£1,000

Online

Vanquis Bank High Yield

Five years

2.91%

£1,000

Online

Tesco Bank Fixed Rate Bond

Five years

2.90%

£2,000

Online

State Bank of India Hi Return Fixed Deposit

Five years

2.86%

£10,000

Branch, post

Shawbrook Bank Fixed Rate Bond

Four years

2.85%

£5,000

Online, post

Bank of London and the Middle East Four-Year Bond*

Four years

2.75%

£25,000

Online

Vanquis Bank High Yield

Four years

2.66%

£1,000

Online

Aldermore Bank Four Year Fixed Rate Account

Four years

2.65%

£1,000

Online, post, branch

Tesco Bank Fixed Rate Bond

Four years

2.65%

£2,000

Online

*Anticipated profit rate

Longer-term bonds

If you want even greater returns, you could lock your money away for seven years. FirstSave is currently paying 3.50% over this term, while you can get 3.40% from SecureTrust Bank, both with a minimum deposit of £1,000. And 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.

This article is regularly updated to reflect the latest rates

Compare savings accounts

Compare Cash ISAs

More on savings and ISAs

Where to earn most interest on your cash

The best notice savings accounts

The best regular savings accounts

The best instant access savings accounts

Is your money safe with a bank you've never heard of?

 

 

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Comments (19)

  • george19a
    Love rating 28
    george19a said

    What's the point in saving at all , be it easy access, a bond, or a pension when interest rates are so derisory? But isn't that the general idea? The country needs us to spend, its just that it's bad form to encourage spending when everyone is in debt.

    Report on 05 December 2012  |  Love thisLove  4 loves
  • killick_becki
    Love rating 62
    killick_becki said

    I'm surprised that the author hasn't pointed out that, with the exception of 1 year bonds, the highest rate on offer now is lower than the average rate from 1 year ago. A dismal state of affairs for savers!

    Report on 05 December 2012  |  Love thisLove  6 loves
  • GaryDean
    Love rating 76
    GaryDean said

    When the rates are low mortgages are lower & the reverse is true. We can't have it both ways. However there is an increasingly growing gap between the haves & the have-nots that needs to be addressed. When you consider the haves are perceived as screwing the populace over from just about every direction through sneaky & illegitimate albeit legal means I fear it won't be the interest rates that is of concern. It will be serious civil unrest that as we speak is further brewing. It doesn't take an awful lot of insight or intelligence to recognize it. Just read a lot of the comments on Lovemoney or Yahoo for that matter.

    Report on 05 December 2012  |  Love thisLove  1 love
  • reubenw
    Love rating 3
    reubenw said

    george19a. Not everyone is in debt. Generally people with substantial savings are not in debt.

    No mention in the article of Peer2Peer lending as a way to save at equivalent rates and also to borrow at sensible rates. I recently made use of Ratesetter and was impressed.

    I see you had an artcicle about P2P lending some time ago... http://www.lovemoney.com/blogs/savings-investments-pensions/savings/16592/why-ive-started-saving-with-ratesetter

    Report on 05 December 2012  |  Love thisLove  0 loves
  • domdahof
    Love rating 0
    domdahof said

    Halifax online saver pays 2.8%.

    Ok,it includes a bonus but it is easy accessible and deserves mention in your article.

    Report on 06 December 2012  |  Love thisLove  0 loves
  • babyhk
    Love rating 10
    babyhk said

    This is where loyalty may count .

    The Post Office usually offers a better rate when the bond term ends as does The Bank of Cyprus.

    Picking up on one of the other comments maybe depending on your type of mortgage pay some of it off or up regular payments obviously paying off credit card balances makes more sense at the moment as their charges tend to be screamingly high.

    Yet to beat Santander 123 current account.

    If anyone can please let us all know!

    Report on 19 January 2013  |  Love thisLove  1 love
  • nickpike
    Love rating 308
    nickpike said

    Don't worry, savers. Interest rates will be ramping up soon.

    Report on 27 January 2013  |  Love thisLove  0 loves
  • nickpike
    Love rating 308
    nickpike said

    What happened to the edit button?

    Just a bit more. We can thank this awful coalition for introducing FLS, more meddling from these pathetic politicians, giving cheap money to the banks and hence they lower the interest rates because they don't need our savings any more. This lending was supposed to be for businesses (borrowing was lowest ever last Q) and to allow FTBs to become some of the highest debtors in the world to buy way overpriced rabbit hutches. Apparently little has trickled out for lending and most is being hoarded by the banks.

    Report on 27 January 2013  |  Love thisLove  6 loves
  • RichardG
    Love rating 3
    RichardG said

    Surely any Account not protected by the FSCS should not be included in this article.

    Report on 04 May 2013  |  Love thisLove  0 loves
  • Arblaster
    Love rating 43
    Arblaster said

    NickPike said

    "Don't worry, savers. Interest rates will be ramping up soon."

    All the more reason for not locking your money away from 5 years at these pathetic rates.

    I cannot understand how the FLS has anything to do with the derisory rates. If it had, then why are the Shariah banks pay ' the going rates' for sukuk? The answer must be that the banks are operating a cartel. I can't say I am surprised. All you have to do is listen to the Anglo Irish tapes on YouTube, and that will give you some measure of the arrogance and contempt bankers hold governments, customers...everybody.

    I often buy non-negotiable bonds. I am withholding my money from the banks until they start paying a decent return.

    Report on 29 June 2013  |  Love thisLove  0 loves
  • Radleyman
    Love rating 23
    Radleyman said

    I agree about Santander 123 account. You can gain 3% on up to £20,000 and a couple can each open an account so up to £40,000 at 3%, and with instant access. Doesn't beat inflation but better than the rest. I wonder if it's possible to open more than one account?

    Report on 03 July 2013  |  Love thisLove  0 loves
  • miramoore
    Love rating 10
    miramoore said

    The only decent rates on offer are from AgriBank... but the bank is not certified by the FSA. It is based in Malta and that sounds more than risky to me...

    Can we have an article from Lovemoney.com about this bank? We need to know who owns it and whether it is safe to invest in it.

    Report on 29 July 2013  |  Love thisLove  1 love
  • Simon Ward
    Love rating 8
    Simon Ward said Report on 30 July 2013  |  Love thisLove  0 loves
  • css
    Love rating 18
    css said

    It would be good if you could provide links to the websites where account are available Online.

    Report on 09 August 2013  |  Love thisLove  0 loves
  • py9mds
    Love rating 1
    py9mds said

    Nationwide are offering 5% for a year on FlexDirect accounts and you can do that with up to 3 accounts with £2,500 in each. Lloyds are offering 3% (with no expiry) on their Classic Vantage accounts, of which you can have up to 4 accounts with £5,000 in each.

    So you can 5% on £7,500 with Nationwide and put a further £20,000 into Lloyds and earn 3% on that. That sounds better to me than Santander for savings up to £27,500 at least, and there's no fee fro these accounts, unlike Santander 123.

    This excludes the cashback you might earn on certain bills with the Santander 123 account, but then some of that will be eaten up by the monthly account fee.

    So the (instant access) accounts above sound a lot better to me than the poor rates on fixed rate bonds, unless you have a very large pot of money (in which case you'd be better off diversifying across bank accounts, investments and P2P lending).

    Those with offset mortgages at higher rates are laughing at the moment if they have substantial cash in their offset account.

    Report on 09 August 2013  |  Love thisLove  1 love
  • DeeTee
    Love rating 3
    DeeTee said

    py9mds could you elaborate a little more on the Nationwide and Lloyds accounts with regards to holding several of them? I wasn't aware this was possible, are they all opened in the same name, or is it several per household for different household members?

    Thanks

    Report on 04 September 2013  |  Love thisLove  1 love
  • andrewjameshowar
    Love rating 26
    andrewjameshowar said

    The Halifax Online Saver pays 1.3% not 2.8%. Even the 1.3% includes an introductory bonus. It's a very poor deal.

    Britannia (=Co-op Bank) could well go bust in the autumn. Balances below £85,000 should be guaranteed by the Government, but it could be a lot of hassle.

    Both AgriBank and P2P schemes are NOT government guaranteed and shouldn't be compared like to like with UK bank and building society accounts.

    Report on 04 September 2013  |  Love thisLove  0 loves
  • grannymabe
    Love rating 2
    grannymabe said

    Arblaster - could you share with us what 'non-negtiable bonds' are please. If you favour them above bank accounts they must be a worthy alternative.

    Report on 31 January 2014  |  Love thisLove  0 loves
  • Arblaster
    Love rating 43
    Arblaster said

    @grannymabe

    A negotiable or marketable bond is a bond that can be bought by, and sold to, anyone between the time it was issued until its maturity date. Examples are gilts, US Treasury Bonds or corporate bonds.

    A non negotiable or non marketable bond is usually sold by the issuer or the issuer's agent, and can only be sold back to the issuer. Examples are US Savings Bonds, Index-linked certificates or a Virgin Money 3 percent bond.

    Features of .negotiable bonds are that the price fluctuates with its market value. Non negotiable bonds tend to have constant prices, although sometimes there is a penalty if you sell the bond back to the issuer before maturity date.

    I am not being rigid about these terms, because I can give you a rigid definition; but I can always think of something that can break the definition. For example, I can say that a non-negotiable bond has a price that is constant, but many unit trusts can only be sold back to the issuer so they are non negotiable, but their value goes up and down like a fiddler's elbow.

    Also, some instruments that are called 'accounts' are actually bonds. For example, you can have a regular saver ACCOUNT; but it is a species of non negotiable BOND in all but name.

    Report on 05 February 2014  |  Love thisLove  0 loves

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