Fixed rate bonds
Although fixed rate bonds vary between plans they normally share a few common features such as;
- The interest rate you are offered will stay consistent no matter what happens to the market in general over the course of your bond. This means you may be locked into an uncompetitive rate should rates start to rise while your money is locked away in a fixed rate bond, but at the same time could secure you a better deal if they fall over the same period.
- You cannot make any withdrawals or additional deposits once you have set up the account
- You cannot close the account early without incurring some form of forfeit.
- Many bond providers will convert your bond into an instant access savings account when the term ends unless you otherwise tell them what you wish to be done with it.
- Tend to offer higher interest rates than their instant access alternative
Since any type of fixed term bond involves you locking your money away for a certain period it’s important to make sure you are getting the best plan before you do so. Using the above tables you can compare some of your different options.
An alternative to a fixed rate bond is a tracker bond; this type of bond usually offers you an interest rate that is reflective of the base rate of interest set by the Bank of England. This means that if the base rates increases so too will the amount you earn in interest, however if it decreases so too will the rate you are offered on your bond.
If you would like to have your savings more readily available to withdraw then an instant access savings account might be a better option for you.
As well as fixed term bonds there are a number of alternative saving options which you should consider such as structured deposit plans - a selection of plans are available on this site. With this type of plan you lock your money away again. But your return is tied to the performance of a market such as the FTSE 100. These plans sometimes offer better returns but they are not guaranteed. When the term comes to end you may only recieve your original deposit back