Should I consider a six or nine month bond this July? | moneyfacts.co.uk

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Michael Brown

Content Writer
Published: 01/07/2022
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With some experts expecting the Bank of England to raise interest rates further, should you consider a short, fixed term home for your savings?

The Bank of England currently expects inflation to rise further, slightly exceeding 11% in October due to an increase in the Ofgem price cap.

It means that there could be further base rate hikes in the future as the Monetary Policy Committee attempts to bring inflation down to its 2% target.

Savers will, no doubt, welcome a potential base rate increase and hope it can be passed on to their own investment. So, if the base rate is to increase, some investors might feel less inclined to commit to a long-term fixed rate bond right now.

With increased interest for six- and nine-month bonds on our consumer website, we have identified the top rates for this corner of the market.

The top paying six-month fixed rate bonds

The top paying six-month bond on the market is from the National Bank of Egypt (UK) Limited and is only available through the Raisin platform. In addition to this, savers will need a minimum investment of £10,000 to start earning interest. Once your account is up and running you can manage your funds online, via the post, or telephone.

For those looking to invest less, the next best rate on the market is from Kent Reliance bank, which is only available through Hargreaves Lansdown’s platform. A single pound is required to start earning interest on this account while it must be managed and opened online.

Finally, those looking for a Sharia’a compliant account instead can consider the Bank of London and The Middle East. Its Premier Deposit Account (Anticipated Profit Rate) pays an expected profit rate on balances of £1,000 or more. It can be opened online and managed via the post. 

The top paying nine-month fixed rate bonds

For adding an additional three months to your fixed term, the National Bank of Egypt (UK) Limited will increase its rate by 0.20%. It too needs a minimum investment of £10,000 and can be managed online, via the post, or telephone. If this account interests you, then applications need to be made via the Raisin platform.

United Trust Bank, meanwhile, offers a slightly lower rate but needs a minimum opening deposit of £5,000. This account can be opened online, and managed online, via the post, or telephone.

Finally, those who need a smaller opening deposit requirement for a nine-month fixed term can consider FCMB Bank (UK). Like the National Bank of Egypt (UK) Limited, the offer is only available via the Raisin platform, but only requires a minimum opening deposit of £1,000. The account can be managed online, via the post, or telephone.   

What are the alternatives?

It is important to remember that savers cannot gain access to their funds during these fixed bonds’ tenure. In addition, the fixed rate options featured in this article do not allow savers to add further funds to their accounts, which means it could restrict those savers who want to make monthly contributions from another source of income.

Easy access accounts could therefore be an alternative, allowing their users quick access to their cash and, in most cases, unlimited further additions to their funds.

However, this flexibility comes at a price as providers typically offer lower interest rates.

To highlight the difference in interest payouts, we have compared how the top easy access account differs from the top fixed short-term bond options in the table below.

Please note that these calculations are made based on a one-off lump sum investment and do not factor in other eventualities.

Savings account

Total investment amount

Period

Rate AER

Total interest earned

Easy Access

£10,000

Six months

1.56%

£78

Six-month bond

£10,000

Six months

2.00%

£100

Easy Access

£10,000

Nine months

1.56%

£117

Nine-month bond

£10,000

Nine months

2.20%

£165

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. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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