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Fixed rate bonds

What's the difference between fixed rate bonds and fixed rate savings accounts?

What is a fixed rate bond? Open in new window
Bond vs savings account Open in new window
Can the interest rate change? Open in new window
How it works Open in new window
Pros vs cons Open in new window
FAQs Open in new window
Compare savings accounts Open in new window
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What is a fixed rate bond?

A fixed rate bond is a savings account that offers a consistent interest rate for a fixed amount of time. Usually, you lock your money away for this set period. So, you can’t easily take your cash out.

It means fixed bonds may be better suited to medium and long-term savers who can afford to set their cash aside. But because they’re less accessible, they could offer higher interest rates in return.

You may also see them called fixed term or fixed rate savings accounts.

Unlike ISAs, you might have to pay tax on the interest your fixed rate bond earns.

Find out more about our Fixed Term Savings Account Open in new window

Is a fixed rate bond the same as a fixed term savings account?

NatWest offers fixed term savings accounts. But these are also known as fixed rate bonds or fixed term deposits at other banks. These products are similar, giving you a fixed interest rate for a set period.

It means your interest rate won’t change. On the other hand, you won’t have instant access to your money. If you do take money out during the fixed term, you might be charged a fee.

How does a fixed rate bond work?

With a fixed rate bond or fixed term savings account, you’ll normally pay in a lump sum at the start of the term. This is different to instant access accounts that allow regular deposits.

Different providers will offer different terms, but they could vary from six months to five years. Longer terms might come with higher interest rates.

Just remember that early withdrawals may lead to penalties. So, you’ll need to be certain about locking your cash away.

How long do fixed rate bonds last?

A fixed bond could last for anywhere between 6 months and 5 years. It all depends on the products your bank offers.

Just remember that with a fixed rate bond, you might not be able to access your money during your chosen term without paying a penalty. NatWest offers 1 year and 2 year fixed rate savings accounts.

Can the interest rate change?

No, the interest rate won’t change as it’s fixed for your specific term. This means any movements in the Bank of England base rate won’t affect you.

You can also work out exactly how much interest you’ll earn before applying.

What are the pros and cons of a fixed rate bond?

Fixed rate bonds or fixed rate savings accounts could be an option if you don’t need instant access to your savings. Here are some pros and cons to consider before applying for a fixed rate savings account.

Pros

  • Certainty over interest rates and returns.
  • Shielded from Bank of England base rate changes.
  • Ability to save a one-off lump sum.
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Cons

  • Limited or no access to your money until a certain date.
  • No opportunity to make regular deposits.
  • No benefit if the base rate rises.
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Fixed rate bond FAQs