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What is a fixed rate bond?
A fixed rate bond is a savings account that offers a consistent interest rate for a fixed amount of time. Usually, you lock your money away for this set period. So, you can’t easily take your cash out.
It means fixed bonds may be better suited to medium and long-term savers who can afford to set their cash aside. But because they’re less accessible, they could offer higher interest rates in return.
You may also see them called fixed term or fixed rate savings accounts.
Unlike ISAs, you might have to pay tax on the interest your fixed rate bond earns.
Pros
- Certainty over interest rates and returns.
- Shielded from Bank of England base rate changes.
- Ability to save a one-off lump sum.
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Cons
- Limited or no access to your money until a certain date.
- No opportunity to make regular deposits.
- No benefit if the base rate rises.
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