Leanne Macardle

Leanne Macardle

Editor
Published: 30/01/2019

At a glance

  • 3-year fixed rate bonds are the perfect compromise between short and long-term fixed rate bonds.
  • As most bonds don’t allow early access to funds, make sure you won’t need your money for the next three years.
  • If early access is allowed, a considerable interest penalty is likely.

Things to consider

When working out whether a 3-year fixed rate bond is for you, remember to consider what you think will happen to interest rates:

  • If rates go up you could find that your bond is paying less than the top rates available and to make matters worse, it may be expensive or impossible to move your money before the end of the term to capitalise on better returns.
  • If rates go down, or remain broadly the same, you’ll earn more than if you had kept your money in the best-paying easy access account.

What else do I need to know?

When taking out a fixed rate bond, you are usually not supposed to withdraw your cash for a specified period of time – in this instance, it will be for three years. Most 3-year fixed rate bonds do not allow you access to your money once it’s been deposited until the bond matures. Where early withdrawals are allowed, a considerable interest penalty will almost certainly have to be paid.

Don’t recognise a fixed rate bond provider?

Many of the best rates available on 3-year fixed rate bonds are offered by smaller, relatively unknown banks who are new to the market. These are often referred to as challenger banks.

Learn more about challenger banks

As all banks and building societies listed by moneyfacts.co.uk must be UK-licensed and part of the Financial Services Compensation Scheme (or an equivalent), you can be safe in the knowledge that the first £85,000 you have saved is protected if the bank or building society were to go bust.

Learn more about depositor protection

Disclaimer: 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.

man counting coins

At a glance

  • 3-year fixed rate bonds are the perfect compromise between short and long-term fixed rate bonds.
  • As most bonds don’t allow early access to funds, make sure you won’t need your money for the next three years.
  • If early access is allowed, a considerable interest penalty is likely.

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