What Is A Fixed Rate Bond? Your Guide

As The Bank Of England base rate rests at its unprecedented low of 0.5%, savers may be wondering which savings and investments will provide the most lucrative return, or if investing in new products is even worth it at all. With a gloomy financial forecast, our savings and investments are now more important than ever and it pays to be clued up about the best saving products on the market.


Just as the public will find themselves in a position of needing to loan money at some point or another in their life (mortgages for example), companies and the government also occasionally need a financial lending hand. The substantial amount of money that such large infrastructures require is best accumulated through issuing bonds to the public market. A bond then, is a loan in which a member of the public becomes the lender to the borrower, or issuer of the bond, such as a bank. The number of investors, sometimes thousands, each provide a portion of the capital needed by the issuer. In exchange for the bond the investor is rewarded with interest payments.


If you have a financial lump sum to invest then a fixed rate bond could be the perfect investment vehicle. As the title implies, a ‘fixed-rate’ will pay a guaranteed amount of interest for a set length of time. You will have the security of knowing in advance what your savings will earn.


– Gives exactly what it says on the tin; the advantage or guarantying a set or ‘fixed’ amount of interest. This gives a sense of security that if the Bank of England base rate drops, and therefore your issuers interest rates also, then you will remain on a higher interest rate. In this case your investment will be working hard for your money.

– The interest rates offered in bonds are usually higher than instant access savings accounts.

– Fixed rate bonds are especially good for savers that are easily tempted as you will not be able to touch your money until the fixed term is completed.

– There is usually a a minimum deposit ranging from £1 to anything even over £50,000.

– There is also a set length of time in which you will be contracted into your bond usually ranging from 6 months to 5 years.

– Depending on which bond and provider you are with, you probably will have no access your savings during the fixed term. It is important to invest money you can only afford to lock away.

– Early closure, withdrawals or deposits may not be allowed or result in an additional charge.

– Having a set rate means that you know exactly how much you will receive by the end of your return so you can plan and organise your finances.

– A fixed rate bond could be used as an income or income growth in retirement. Its set rate means you know exactly how much you will receive so you can plan and organise your finances.

– It is low risk investment as you are guaranteed a fixed, steady interest rate, even if interest rates drop. Alternatively, the national rate of inflation could increases higher than the interest you will earning in a bond.

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