The financial markets have changed a lot in recent months, which means many people could be seeking a bit of security when it comes to their cash. That's where a short-term bond could come in. This kind of account can give decent returns without asking you to lock your money away for too long, offering security without too much commitment, the ideal combination given that it's difficult to know what's coming next.
Short-term bonds can also be perfect if you're planning a big purchase in the next year or so and want the best returns possible, and are even more appropriate if you're concerned about rates rising in the next few years and are reluctant to lock your money away for too long. They still manage to offer better rates than their easy access alternatives, and with long-term rates in particular suffering from rate cuts in recent months, a short-term account could be just the thing.
However, it's important to be aware of the restrictions associated with these kinds of accounts. Most won't let you make further additions and earlier access (if permitted) could incur hefty penalties, so you'll need to be happy with both your investment and the term of the bond from the outset. But, if you've got a lump sum to invest and are confident you won't need the cash in the foreseeable future, these accounts could be the ideal solution.
So, to get you started, here are the top six short-term bonds currently on the market, all of which have terms of between 12 and 18 months:
Comfortably taking the top spot in the short-term market is this 18-month deal from Al Rayan Bank, a Sharia'a compliant account that pays an expected profit rate of 1.51% AER on a minimum investment of £1,000. As is common in this sector of the market, further additions and earlier access won't be permitted, so savers will need to be happy with both their investment and the term chosen from the outset.
In second place is this deal from BLME which pays an expected profit rate of 1.74% AER, provided you're willing to tie up your money for 18 months. It doesn't permit further additions or withdrawals, and although it requires a hefty minimum investment of £25,000 as well as a BLME linked current account, it could be a competitive choice for those who already have a healthy savings pot.
Al Rayan Bank has done it again with a second account making the charts, this time the 12-month version of Fixed Term Deposit, which comfortably secures a top-three place. This Sharia'a compliant account pays an expected profit rate of 1.41% AER on a minimum investment of £1,000, with further additions and earlier access once again not permitted.
Next up is this bond from Charter Savings Bank. It's an internet-operated account that pays 1.40% on a minimum investment of £1,000, and although the full 18-month term must always be served, it offers the chance for further additions to be made for a limited period, offering some welcome flexibility.
Charter Savings Bank is the second provider to secure two places in the chart, this time with its 12-month bond which comfortably secures a top-five spot. This internet-operated account pays 1.38% AER on maturity, with all other features mirroring that of the 18-month version.
What can we say? These challenger banks are certainly holding their own in the short-term market! BLME has crept into the top six for a second time, this time with its 12-month account, which pays an expected profit rate of 1.38% AER to those who are happy to tie up their money for a year. All other features are the same as its 18-month counterpart.
Information & Rates correct as at: 05.10.2016
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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