How savers get the best short-term fixed saving rates | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

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Derin Clark

Derin Clark

Online Reporter
Published: 03/02/2021

Fixed rate bonds have often been popular with savers as they not only offer a fixed rate for the duration of their term, but also usually offer the best savings rates overall.

Indeed, today the top saving rate is available on a five year fixed rate bond, but with saving rates across the charts at record lows, many savers are reluctant to lock into a long-term bond due to future uncertainty and concerns that a rise in inflation will erode their savings.

This concern is not unfounded, as the top rate being offered in the fixed bond chart is below the Bank of England’s target inflation rate of 2%. Gatehouse Bank currently pays an expected profit rate of 1.50% AER on its five-year account, which if a saver locked into and the Bank of England meets its target rate of inflation, would result in the saver’s deposit being eroded by inflation.

During 2020, the actual rate of inflation fluctuated between a high of 2.70% in January and a low of 0.50% in August and the possibility of rising inflation means that savers may be better off considering a short-term bond instead. A one year or 18 month fixed bond gives savers the ability to lock their money into an account offering higher rates than easy access accounts, but also offers the ability to move their savings after the account matures into a higher-paying account if saving rates rise over the next 18 months. Saying this, there is no guarantee that saving rates will rise in the near future, and there is the risk that rates might fall further especially if the Bank of England introduces a negative base rate.

How to get the best short-term bond saving rates

As savers locking into a short-term fixed rate bond cannot move their money until the account matures, they need to ensure that they lock into the best possible rate. This means that savers need to consider choosing a challenger or sharia bank, as these banks are currently dominating the fixed bond charts.

For example, research carried out by found that of the top six rates in our one year fixed rate bond chart are being offered on 16 accounts. Of these, five are being offered as a sharia rate and the remaining 11 from challenger banks.

The sharia bank Al Rayan Bank tops the chart overall, paying an expected profit rate of 0.85% AER on the 12-month option of its Fixed Term Deposit Account. Zopa had the next best rate of 0.71% AER on its 1 Year Fixed Term Savings account. Meanwhile, Ford Money pays 0.70% on its Fixed Saver 1 Year, but this account is only available to existing customers.

Top six rates in the one year fixed rate bond chart

Provider Account AER Type of bank/account
Al Rayan Bank Fixed Term Deposit 0.85% (expected profit rate) Sharia
Zopa 1 Year Fixed Term Savings 0.71% Challenger bank
Ford Money* Fixed Saver 1 Year 0.70% Challenger bank
PCF Bank 1 Year Term Deposit Issue 34 0.66% Challenger bank
Habib Bank Zurich plc HBZ Sirat eDeposit (Islamic Fixed Term Account) 0.65% (expected profit rate) Sharia
QIB (UK) Raisin UK - 1 Year Fixed Term Deposit 0.65% (expected profit rate) Sharia
Union Bank of India (UK) Ltd Fixed Rate Deposit 0.65% Challenger bank
Union Bank of India (UK) Ltd Union Premier Bond 0.65% Challenger bank
Bank of London and The Middle East Premier Deposit Account 0.60% (expected profit rate) Sharia
AIB Fixed Rate Saver 0.60% Challenger bank
Allied Irish Bank (GB) Fixed Rate Saver 0.60% Challenger bank
Charity Bank Ethical 1-Year Fixed Rate Account 0.60% Challenger bank
Cynergy Bank* Loyalty Fixed Rate Bond 0.60% Challenger bank
ICICI Bank UK SuperSaver Bond 0.60% Challenger bank
UBL UK 1 Year Fixed Term Deposit 0.60% Challenger bank
UBL UK 1 Year Islamic Fixed Term Deposit 0.60% (expected profit rate) Sharia

* only available to existing customers


For those happy to lock into an account for six months or longer, 18 month fixed rate bonds offer slightly better rates than one year options. Of the top six rates on 18 month fixed rate bonds, three are being offered by sharia banks and the remaining three by challenger banks. Again, Al Rayan Bank offers the best 18 month fixed bond rate with the 18-month version of its Fixed Rate Bond paying an expected profit rate of 0.90% AER.

The top six 18 month fixed bond rates

Provider Account AER Type of bank/account
Al Rayan Bank Fixed Term Deposit 0.90% (expected profit rate) Sharia
DF Capital 18 Month Fixed Rate Deposit (Issue 4) 0.77% Challenger bank
QIB (UK) Raisin UK - 18 Month Fixed Term Deposit 0.75% (expected profit rate) Sharia
Union Bank of India (UK) Ltd Fixed Rate Deposit 0.70% Challenger bank
Bank of London and The Middle East Premier Deposit Account 0.65% (expected profit rate) Sharia
Masthaven Bank 18 Month Flexible Term Saver 0.63% Challenger bank

What is a challenger and sharia bank?

Although challenger and sharia banks are often less familiar to savers than high street banks and building societies, many have in fact been around for many years. Sharia banks are often considered a type of challenger bank, and some banks, such as UBL UK, offer both sharia and non-sharia accounts.

Challenger banks first emerged after the 2008/09 economic crisis and are known as challenger banks as they started challenging the established big four banks for a share of the market. Challenger banks must abide by the same rules and regulations as any UK authorised bank. As well as this, all challenger banks, including sharia banks, listed on are authorised by the Prudential Regulation Authority, which means that saving deposits up to £85,000 under one banking licence are protected under the Financial Services Compensation Scheme (FSCS). To find out more about these types of banks, read our guide on challenger banks.

Savers considering a sharia account should be aware that these banks also abide by the rules and regulations as any other UK authorised account. Sharia accounts are available to savers no matter what their religious beliefs and the difference between a sharia and non-sharia account, is that a sharia account operates under Islamic finance principles, which means that interest cannot be added to savings. Instead of adding interest, these accounts accumulate expected profit, which is generated from investments the saving deposits are invested into. More information about sharia banks can be found by reading our guide on sharia-compliant savings accounts.


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