Best up to 1 year fixed rate ISAs

Six month fixed rate ISAs explained

Six-month fixed rate ISAs will ask you to lock away a lump sum of money for six months in return for a fixed rate of interest. You won’t normally be able to make any additions – and if so, it will likely only be for a short time.

As is common with fixed ISAs, you’ll be expected to keep your funds invested for the full term, with hefty interest penalties often applied if you choose to access the money early. At the end of the term, you can withdraw the funds – including any accumulated interest – and decide what to do next.

Some benefits of six-month ISAs include:

• The rate is guaranteed, so you’ll know exactly how much interest you’ll earn by the end of the term.
• Rates will typically be higher than for easy access cash ISAs.
• You needn’t lose access to your money for too long.
• Your funds are protected from the possibility of falling interest rates.
• Conversely, if rates rise during the six months, you can reinvest your money in a higher-paying account relatively quickly.
• As with all cash ISAs, any interest earned is tax-free.

For someone with short-term savings goals, this kind of account can offer the ideal trade-off between returns and flexibility, with all the usual perks of an ISA.

Six-month ISAs aren’t common. There are very few accounts to choose from, and all of them will likely be offered by challenger banks. But don’t be put off – challengers are known for paying higher rates of interest than their mainstream counterparts, and as long as they’ve got suitable FSCS protection or equivalent (which all providers in our charts will have), you needn’t worry about the security of your money with anything up to £85,000 being protected in the even the bank fails.