Leanne Macardle

Leanne Macardle

Editor
Published: 30/01/2019

At a glance

  • Long-term fixed rate bonds offer the very best bond rates.
  • Make sure you won’t need access to your funds for the full term.
  • A significant interest penalty is likely to be charged if early access to funds does happen to be allowed.
  • Think carefully about what might happen to interest rates in the future.

Things to consider

When working out whether a long-term fixed rate bond is for you, it is vital that you consider what you think might happen to interest rates:

  • If rates go up, you could find that your bond eventually pays less than the top rates available. This risk is greatly heightened with long-term bonds, and if your bond does not allow early access to funds, you will not be able to move your money before the end of the term to capitalise on these better returns.
  • If rates happen to go down, or remain broadly the same, you’ll earn more with a long-term bond 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 not supposed to withdraw your cash for the specified period of time. Indeed, most long-term 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 in the fixed rate bond market 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.

businessman counting coins

At a glance

  • Long-term fixed rate bonds offer the very best bond rates.
  • Make sure you won’t need access to your funds for the full term.
  • A significant interest penalty is likely to be charged if early access to funds does happen to be allowed.
  • Think carefully about what might happen to interest rates in the future.

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