What are 3 year fixed rate bonds?
If you can afford to commit your savings to earning interest for a number of years, you may wish to consider a 3 year fixed rate bond. Bonds are similar to many other savings products, although it should be remembered that money that is invested in this way cannot generally be accessed until the agreed period has ended. In order to find the best possible deals on offer, it is always advisable to compare fixed rate bonds from a range of providers.
3 year fixed rate bonds are a form of savings account which offer you a guaranteed interest payment over 3 years. Interest can be paid monthly, quarterly, annually or on maturity depending on the fixed rate saving terms. With a fixed rate bond you need to be comfortable tying up capital for this length of time - many bond providers will allow you limited withdrawal access e.g. one withdrawal a year but you should check the small print.
You can compare 3 year fixed rate bonds and other deals available in our simple comparison tables below.
Top Ten Tips for 3 year fixed rate bonds in 2016
- The interest rate offered over the 3 year term is guaranteed. This is unlike instant access savings accounts where the interest rate can go down or up at short notice. However with interest rate deals from providers changing all the time it is important to shop around for the best deals
- If you are comfortable with internet banking rates for online fixed rate bonds are often the most competitive.
- Different banks and building societies will have different views on medium to long term interest rates. If interest rates rise more slowly than expected a fixed rate bond may give you a better return than what you could expect from an instant access account. Some bond providers offer limited withdrawal terms so if you might need access to capital during the savings term look out for deals where you can make withdrawals without interest penalties - check the small print
- Some fixed rate bonds provide flexibility e.g. additional top ups can be made during the savings term - check the small print.
- As well as 3 year fixed rate terms many providers will offer bond terms from 12 months to 5 years in duration so you can choose a term that suits your circumstances
- Many fixed rate bond providers offer online access so you can see how much interest you are earning.
- The benefit of enjoying a higher rate of interest must be weighed against tying up your capital for a fixed term. If you need access to your capital before maturity this may not be possible and if it is there may be interest penalties.
- If interest rates rise over the 3 year term of the investment you may find the interest rate on your capital is no longer competitive compared to new offerings in the market.
- Many fixed rate bond providers require a high minimum deposit e.g. £5,000
- Diarise the maturity date so you prepare in advance what to do with the maturity proceeds.