What are best fixed rate bonds?
If you're looking for a way to save that's different from a traditional savings account, best fixed rate bonds are one option.
Available from banks and other financial institutions, best fixed rate bonds allow you to put away a certain amount of money for a set period, after which you will receive a predetermined amount of interest, or 'coupon' as it is sometimes referred to.
With best fixed rate bonds, the level of interest is set from the outset - and will not change during the term of the bond.
As a general rule, you will be unable to withdraw money from the account - or add to it - during the term, making best fixed rate bonds good options for those who can afford to put away some money without needing to dip into it.
Terms for best fixed rate bonds usually last between six months and five years, so you can select the period that works best for you.
How can I benefit from best fixed rate bonds?
Best fixed rate bonds can be a good choice for those who are able to put aside some funds without accessing them, as well as working well for people who are keen to benefit from long-term savings.
One of the benefits of best fixed rate bonds is that the level of interest will not change. So, should the rates fall you will continue receiving the agreed amount. However, you should be mindful that this can also work against you - should interest rates improve, you will find yourself locked into lower levels for the duration of the agreed period.
Offering a higher level of interest on the whole, fixed rate savings bonds can prove useful for people saving up for things like mortgages. If you are able to leave your money in a bond for a long period, you could see yourself gaining more interest.
Three things to consider before choosing best fixed rate bonds
Before opting for best fixed rate bonds, there are three factors you should consider.
Firstly, by choosing best fixed rate bonds you will by tying your money in for a set period, meaning you will not have the opportunity to access it until the end of the agreed term. While in emergency situations providers may allow you access, this will usually come with some kind of penalty which could involve you losing your interest.
Meanwhile, you should consider the different types of best fixed rate bonds to ensure you get the best deal. Interest can be added in monthly instalments or at the end of the agreed period, which can have substantial effects on your savings.
Best fixed rate bonds which offer monthly interest, for example, could see you accruing more funds on the whole. This is because the sum of your account will increase each month, meaning you gain interest on higher amounts on a monthly basis.
Those which offer interest at the end of the term alone, however, mean you will only accrue interest on your initial balance.
Lastly, before choosing your fixed rate savings bonds you should check whether they are part of the Financial Services Compensation Scheme. Under this, your investment will be protected should your bank collapse.
Best fixed rate bonds: where can I find out more?
When it comes to choosing best fixed rate bonds, it is essential to carefully consider all the factors which may affect your savings, as well as ensuring your account will match your needs.
Talking to a number of providers will help you gain a clearer picture about the different options available; however, websites such as the Financial Services Authority (FSA) may also prove a useful source of unbiased information.