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Fixed-rate accounts reach two-year highs: here are the best

Amelia Murray
Savers who put their money into a fixed-rate bond will not be able to access their capital for the duration of the term - Alamy

The rates of fixed-term savings bonds are creeping up and are heading towards levels not seen for the last two years.

The average one-year fixed-rate bond now pays 1.19pc, according to Moneyfacts, the data firm, the highest since June 2016. The average long-term bond now offers returns of 1.68pc.

Competition is being driven by a number of small, online only banks which savers may not be familiar with.

Check if the providers are covered by the Financial Compensation Services Scheme, which protects up to £85,000. Some European banks which "passport", meaning they have a UK division, may subscribe to a similar scheme in their home country. If it goes bust, you may face exchange rate and language issues and it may take longer to get your money back.

By tying up funds in fixed savings bonds, customers can guarantee the rate for the term and protect themselves against future cuts.

Savers who have used up their cash Isa subscription for this tax year (£20,000), and want to deposit any extra savings into fixed-rate bonds or easy-access savings accounts, should read this guide (which will be updated as deals change) to find out the best rates on offer. 

It's part of our series of articles that highlight the best savings deals - and expose the catches.

Best fixed-rate bonds

ONE YEAR

Ikano Bank pays a top rate of 1.85pc.

Accounts can be opened online with £1,000. No access within the term.

After a year the account reverts to an Easy Saver account which currently pays a variable rate of 1.01pc.

Savings held with Ikano Bank are covered by the Swedish Deposit Insurance Scheme, the equivalent of the FSCS, which also covers £85,000. 

TWO YEARS

Ikano Bank and Secure Trust Bank both offer 2.1pc.

For the Ikano account, the same rules apply as above.

Secure Trust Bank customers can open an account online with a minimum deposit of £1,000.  There is a fixed maturity date of April 29 2020.

No access is permitted during the term. When the account matures funds will be transferred into a Matured Funds Access account.

THREE YEARS

The top three-year bond is offered by Vanquis Bank Savings which pays 2.3pc.

Accounts can be opened online with £1,000 and can also be managed by post or phone.

Three weeks before your account matures the bank will write to you for further instructions. If it doesn't hear anything back it will automatically pay funds into your nominated account or into its own easy-access account.

FOUR YEARS

Vanquis Bank Savings also offers a best-buy four-year account with a rate of 2.47pc. Savers must have at least £1,000.

FIVE YEARS

The highest five-year rate is 2.65pc offered by Secure Trust Bank.  

The account matures on May 3 2023.

The minimum deposit is £1,000.

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