| Rank | Provider | Rate |
|---|---|---|
| 1 | DF Capital | 4.25% |
| 2 | Castle Community Bank | 4.24% |
| 3 | The Access Bank UK Limited | 4.2% |
| 4 | Birmingham Bank | 4.18% |
| 5 | Cynergy Bank | 4.17% |
| 6 | Investec Bank plc | 4.16% |
| 7 | Chetwood Bank | 4.12% |
| 8 | Atom Bank | 4.11% |
| 9 | Habib Bank Zurich plc | 4.1% |
| 10 | Mansfield Building Society | 4.1% |
The Financial Services Compensation Scheme (FSCS) guarantees that it will step in to compensate the first £120,000 you have saved with a UK-authorised bank, building society or credit union in the event that the business goes bust.
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If you’re looking for a home for your savings, and you won’t need to access them for 2 years, a 2 year fixed rate bond is a good option, if you can find one paying a decent amount of interest. Here’s what you need to consider, including the pros and cons and how to compare and choose the best one for you.
Fixed rate bonds involve depositing a set amount of money for an agreed period of time at a fixed interest rate. With 2 year fixed rate bonds, the money is locked in for a period of 2 years, although there are other fixed terms available, which usually range from 1 to 5 years.
With a 2 year fixed rate bond, normally you won’t be able to add money to the savings pot or withdraw it for the duration of that 2 years. The interest rate you get is fixed from the start, which provides certainty on your level of return (although that’s not so great if interest rates go up elsewhere in the meantime).
There is usually a chunky minimum deposit required, so a 2 year fixed rate bond could be a good option if you have a lump sum available that you know you won’t need to get your hands on again in the immediate future.
Bonds with a 2-year term will generally pay a better rate than 18-month (or shorter) terms but a worse rate than 3-year (or longer) terms.
However, at the moment, you can actually get a better rate (6.25% vs 4.36%) on a 1-year term. If you suspect that interest rates are likely to start to come down, then you may still prefer to "lock in" for 2 years, even if it's at a lower rate.
These are two main types of fixed rate bonds:
The best 2 year fixed rate bond for you will be the one that best meets your individual needs. So here are some points to consider when choosing your account:
Typically, there is a minimum deposit of £500 or £1,000 required to open a 2-year fixed rate bond. There are some accounts that can be opened with as little as £1, but it’s not usually worth opening a fixed rate bond with as little as this, unless your provider permits additional deposits.
The maximum amount you can put into one of these bonds is usually capped at around the £250,000 mark, but some providers will potentially let you put in millions of pounds (if you’re lucky enough to have that much to spare!).
When thinking about how much money to place in your bond, remember there is tax payable on the earnings from savings interest, although everyone gets a yearly allowance before the tax liability kicks in. Basic-rate taxpayers can earn up to £1,000 in interest each year tax-free, and for higher-rate taxpayers, it’s £500. Additional rate taxpayers have no personal savings allowance.
Funds deposited at a financial institution with a UK banking licence are protected by the Financial Services Compensation Scheme (FSCS) up to the value of £120,000 per person.
But you must be mindful that these limits apply to each bank (or banking group), so if you have a current account and several savings accounts with one provider containing funds totalling more than £120,000, any amount over this threshold won’t be covered.
Money deposited with financial providers that don’t have a UK banking licence also won’t be covered specifically by the FSCS. Although if the provider is regulated by the FCA and is allowed to take customer deposits in this country, it must have other safeguards in place, such as ring-fencing its customers’ money in accounts held at UK banks.
It’s time to cash out! As the bond will have reached the end of its fixed term (or “matured”), your provider will pay you the interest you’ve earned during this time, and you can then draw out your original lump sum plus the interest. Typically, you can choose to have this paid back into your current account or into another fixed term bond if you’d like to continue saving.
| Rates up to | 4.25% AER |
|---|---|
| Number of accounts | 180 |
| Minimum investment | £1 |
| Maximum investment | £10,000,000 |
| Opening options | Branch, website, mobile app, post, telephone |
Interest rates have shot up over the last few years, thanks to the Bank of England raising the base rate, and that means you have lots of options when it comes to fixed-rate savings accounts. Before you open one, always check things like the minimum amount you need to deposit to open the account and also any penalties if you decide to close it within the 2 years. This will normally be a loss of interest or closure of the account but the terms differ depending on the account and the provider.”
As with any other type of savings account, locking money away into a 2-year fixed bond comes with advantages and disadvantages. But the key thing to bear in mind with a fixed-rate bond of any term up to 5 years is that they can offer a better return than if you had placed your money in an easy access savings account over the same period.
So, if you have at least £500 – £1,000 in spare cash and want to save for a medium term goal, you may want to look at placing it in a 2 year fixed rate bond. Just be confident that you won’t need access to that money in the meantime, as the penalty fees for withdrawing before the end of the fixed term can be substantial.
If you’re looking at saving for a much longer time horizon, say for 10 years or more, you’re more likely to get a better return on your money by investing it. To find out more about how to choose what kind of investments may suit you, take a look at our investments guide.
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See what you could earn monthly, annually or at bond maturity with our fixed-rate bond calculator integrated with live bond rates.
Discover more about 18-month fixed-rate bonds.
Discover more about how monthly interest fixed-rate bonds work.
Learn more about 6-month fixed-rate bonds and how to open an account.
Discover how to find the best fixed-rate bonds and how they compare to other savings accounts.
Discover all you need to know about 5-year fixed-rate bonds, including how to find the best one for you.
How to get the best 1-year fixed-rate bond. Here’s what you need to know.