These types of accounts allow you to deposit a single lump sum for a set period. The account offers a fixed interest rate on your money for that set period. You will receive interest every year that you have the bond, and this interest rate is fixed for the duration of the term. The period can be between one to five years or longer. The longer you lock away your money, the higher the rates are.
• The interest rate is fixed for the full term, so you won’t be affected if interest rates go down.
• High interest rates if you are willing to lock away your money for a long time. The longer you lock away your money, the higher the rates are.
• Many fixed rate bonds require large initial deposits.
• You will usually need to put in at least £1,000 to open this type of account.
• You can’t deposit additional money during your fixed term.
• You typically cannot make withdrawals for the duration of the agreed term. However, if you are to make a withdrawal you are likely to receive big penalties for early withdrawal.
Why choose a Fixed-Rate Bonds?
Fixed rate bonds are best suited if you can afford to set aside a large of sum of money for a long period of time. The interest rate is fixed for the full term therefore, you won’t be affected if interest rates go down in the future.