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Fixed rate bonds give you fixed interest savings for a set period of time. These bonds are often issued by the government. 

The fixed interest rate remains constant throughout the term of the loan. This is generally for a longer duration than a variable-rate bond. But what are fixed rate bonds good for? Let’s take a look at the pros and cons of using this form of debt - today, let’s explore the top fixed rate bonds.

Fixed Rate Bonds

Our Top Pick of Best Fixed Rate Bonds (UK) ๐Ÿ‡ฌ๐Ÿ‡ง

Considering fixed rate bonds? When crunching your Trading Data, take time to know your circumstances - today, it’s sensible to invest in practical things with direct use.

But a few key things to know when understanding popular fixed rate bonds:

  • ๐Ÿ—  Fixed-rate bonds allow savers to lock in a rate for their savings over a fixed period of time. 
  • ๐Ÿ—  These are a useful option for those who are looking to put money aside regularly and not worry about market fluctuations.
  • ๐Ÿ—  But the UK gov is potentially seeing rising inflation - should you lock in interest rates now when you could get more for your cash with time, especially when most don’t let you withdraw money during the bond period?

Top Fixed Rate Bonds โ€“ Reviews 2023 ๐Ÿ“˜

Service ProviderRating
1. Ford Moneyโ˜…โ˜…โ˜…โ˜…โ˜…Open Account
2. Aldermoreโ˜…โ˜…โ˜…โ˜…โ˜…Open Account
3. Zopaโ˜…โ˜…โ˜…โ˜…โ˜…Open Account
4. Kent Relianceโ˜…โ˜…โ˜…โ˜…โ˜…Open Account


1. Ford Money Review โ€“ Top Fixed Rate Bonds Provider

Ford Money is a fixed-rate bond that is available from a number of high-street banks. 

This bond is set at a reportedly fixed rate of 2 to 2.3 per cent (one year), meaning that you will be able to lock in this rate for the entire bond period. 

The minimum investment amount is £500, and the bond can be opened online and held in a registered bank account. No matter how large or small your savings goals may be, there is a Ford Money that will work for your needs.

The best part about this bond is that it is available from a number of high-street banks, ensuring that you have a wide array of options for your bond.

In short, you’re helping the company to finance new electric vehicles and increase its amount of credit to customers who have lower scores. If you do not own a Ford vehicle, you may find this bond to be of limited use. 

Nevertheless, because the interest rate is fixed, you know that you will earn the same amount each month. At the end of the bond period, you may choose to either keep the money in the Ford Money account or withdraw it but not during the bond period. 

You can also choose to hold the bond for a set term and either receive your interest at the end of the term or let the bond go back to the lender.

PROS

  • Minimum investment only ยฃ500
  • Earn the same amount each month
  • Finance the development of new Ford electric vehicles

CONS

  • Withdrawals not permitted

2. Aldermore Review โ€“ Leading Fixed Rate Bonds Provider

Aldermore is a relatively new brand that is currently available from just one bank: Santander.

They’re classified as a retail bank that provides financial services to SMBs. It was made in 2009 and, since March of 2015, was listed on the London Stock Exchange.

They also offer a fixed-rate bond that is available at an optimal rate of around 4 per cent for a decade and 2 per cent for one year. This rate is fixed for the entire bond period, meaning that you are guaranteed to receive this rate every single year. Be sure to double-check first. 

The Aldermore funds are managed by Carmignac, a world-famous asset management firm. The funds are made up of a diverse portfolio of assets, including equities, bonds, and real estate. Their bond can be held for either 6 or 12 months. 

If you choose to hold the bond for a year, you will earn interest at the end of the term. If you choose to hold it for half of that period, you will get full interest at the end of the term and have the option to withdraw your investment. 

This is a government-backed bond, so you are theoretically guaranteed to receive your money back if the bond is withdrawn for non-commercial reasons. Aldermore is currently the only fixed-rate bond currently offered by a high-street bank.

PROS

  • Government-backed bond
  • Hold for either 6 or 12 months
  • Managed by Carmignac, a world-famous asset management firm

CONS

  • Withdrawals not permitted

3. Zopa Review โ€“ Popular Fixed Rate Bonds

Zopa is a popular fixed-rate bond that is currently offered by five different banks

This bond is reportedly available at a rate of around 4-5 per cent for 10 years, and around 2 percent for a year. 

This company has a strong track-record, as a British financial services company offering deposit accounts and credit cards. It started out as the world's first peer-to-peer lending company in 2005 and achieved a full banking licence five years later. However, the p2p aspect of Zopa ended in December 2021.

You can choose the length of time that you want to lock in this rate, allowing you to save for a larger amount of time. Zopa is a self-invested personal pension, so you can manage your own money. This bond is currently offered by the following banks: 

  • Barclays 
  • Lloyds 
  • Santander 
  • The Co-operative 
  • Zopa 

Zopa is another popular fixed-rate bond that is offered by a variety of high-street banks. Which means it can be considered a low-risk type of bond, also allowing anyone over the age of 18 to invest. You do not need to demonstrate any particular level of financial knowledge to invest in this bond. 

Overall, the bond offered by many different British banks. This means that you have a wide array of options for your bond and have a competitive 2.37% AER that is fixed for 1 year.

PROS

  • Offered by five different banks
  • Self-invested personal pension
  • 2.37% AER (reportedly), fixed for a year

CONS

  • Withdrawals not permitted during the bondโ€™s period

4. Kent Reliance Review โ€“ Top Fixed Rate Bonds Provider

Kent Reliance was forged over 150 years ago, aiming to help the people of Kent to reach their financial goals.

This banking services provider is actually tied to trading entity OneSavings Bank plc, based in Kent, England. 

If the name sounds unfamiliar, it’s not due to this being a new company. It was founded in 1898 under the name Chatham & District Reliance Building Society, but eventually changed its name to Kent Reliance Building Society in 1986 after going through a merger-and-acquisition with Herne Bay Building Society.

Today, they have savings accounts, bonds and tax-relief award-winning ISAs that aid people across the UK in making the most of their money. Kent Reliance also offers is a fixed-rate bond that is currently available through the following banks: 

  • Halifax 
  • Skipton 
  • Sainsbury’s Bank 
  • The Co-operative 
  • Asda 
  • Waitrose 
  • M&S 

The best thing about this bond is that it is currently offered by (reportedly) twelve different banks, ensuring that you have an easy way to access funds and giving you a wide array of options. 

Another advantage of Kent Reliance is that it is a low-risk bond that allows anyone over the age of 18 to invest. This means that you do not need to demonstrate any particular level of financial knowledge to invest in this bond. This is a government-backed bond.

PROS

  • Government-backed bond
  • Anyone over 18 can invest
  • Reportedly offered by 12 different banks

CONS

  • Icon List ItWithdrawals not permitted
  • Must be over 18 to invest

Best Fixed Rate Bonds โ€“ Buying Guide ๐Ÿ“Š

Once again, seeing as interest rates seem to be climbing, fixed-rate bonds may be a bad idea. 

There are several ways to invest in fixed rate bonds. However, the most common way is to buy them through a brokerage firm or bank and can usually be bought in increments of £1,000.


Top Fixed Rate Bonds: A Brief Overview

Fixed rate bonds have the same structure and features of standard bank loans.

But instead of borrowing, you’re lending the government or another institution money with a fixed interest rate for a fixed length of time. 

Brief Overview

In this sense, it can be a safer option if you’re planning on keeping your money in the same investment for an extended period of time. Fixed rate bonds are usually issued by banks or other institutional investors. They’re typically sold to get a guaranteed return by the federal government. 

A fixed rate means the interest you’ll pay each month, or year, is the same. The rate may go down if interest rates fall, but it won’t increase either.

What are fixed rate bonds good for?

Fixed rate bonds are interesting for investors who want to lock in a specific interest rate for a long period. 

For example, if you have a £100,000 loan at 5% and a year from now the interest rate is up to 6%, you might want to get into the market with a fixed rate bond. You could make payments that cover the full amount of the loan and then leave it to mature at 5%. 

Or you might choose to pay off the loan earlier, which is your right depending on the terms of the bond. Fixed rate bonds are also interesting for long-term investors who want a stable source of extra income but don’t need frequent access to cash. 

Instead of taking on a lump sum of money, you can take out a fixed rate bond and then periodically roll it into another type of loan, like a mortgage or car loan. The interest from the bond will be paid off every year and you’ll earn the same amount each time you roll it into another debt. This can be an interesting way to reduce the amount of interest you pay over time.

โ˜‘๏ธ Advantages in a Nutshell

  • No Fear of Being Interest Rate Switched 
  • Guaranteed Interest Rate 
  • Longer Term Diversification 
  • No Taxes on Interest Income 
  • Easier Management of Cash Flow and Administration 

Fixed rate bonds are an interesting choice if you’re looking to keep your money in the same investment for an extended period of time. 

You may also want to consider them if you’re planning on using the money for a specific purchase in the future. For instance, you could use a fixed rate bond to fund your child’s apprenticeship. 

You won’t have to worry about fluctuating interest rates and can plan on having the same amount of money available when it comes time to pay tuition. 

What is it not good for?

Fixed rate bonds are not ideal for investors who want to get into the market with an optimal interest rate when that rate is likely to increase over time. 

โŽ Disadvantages in a Nutshell

  • Risk of Inflation Increases with No Interest Rate Change 
  • Bonds Reset and Start Over Each Year, or Every So Often Depending On Terms  
  • If Interest Rates Go Down, You’re Locked Into the High Interest Rate 
  • If Interest Rates Go Up, You’re Locked Into the Low Interest Rate
  • Fixed Rate Bonds Aren’t Good For Frequent Payments 
  • Lower Interest on Investment Returns

Fixed Rate Bonds: 3 Steps To Get Started

1. Use a Fixed Rate Bonds calculator (here is a simpler version) to compare rates from top lenders and see what kind of savings you could have by refinancing your loan.

Just enter the information about your current loan and we'll show you how much it would cost every month if you refinanced using a fixed rate bond (as well as the amount of money that could potentially be saved). 

You can also use this calculator to see what kind of impact different repayment periods would have on your payments. Just choose how many years or months you'd like to pay off the debt in, then hit "Calculate" and we'll display how much more or less each option will cost compared with your current loan's monthly payment amount.

2. Check out our list of recommended lenders for fixed rate bonds. Fixed rate bonds have the same structure and features of standard bank loans, but rather than borrowing you are lending. The rate you’ll be rewarded each month, or year, will be the same. This is helpful when you don’t want to worry about fluctuating interest rates.

However, it can also be a safer option if you’re planning on keeping your money in the same investment for an extended period of time. Fixed rate bonds are usually issued by banks or other institutional investors. They’re typically sold to get a guaranteed return by the federal government. 

A fixed rate means the interest you’ll pay each month, or year, is the same. The rate may go down if interest rates fall, but it won’t increase either.

3. Get a fixed rate bond quote from one of our recommended lenders and apply online in minutes. It could be advisable that you compare at least three fixed rate bond quotes to see how much you could potentially save even more.


Variable Rate Bonds vs. Fixed Rate Bonds

Variable-rate bonds typically fluctuate in price based on the prevailing interest rate. This means you can expect to see rates go up and down throughout the year, but they will generally be higher than a fixed rate.

Variable rate bonds could fluctuate in price more than once a year. If you’re sensitive to the uncertainty of rates, this could be a deal breaker. Before you choose a variable-rate bond, ask yourself if you’d be more comfortable with a fixed rate. Advantages include:

Up
  • Can Invest Smaller Amounts (as low as £100) Than With Fixed Rate Bonds 
  • Can Invest in a Wide Variety of Bond Types (Corporate, Government, Corporate/Government Mixes, etc.)

Variable rate bonds can also be bought through a brokerage firm or bank. In this case they will be issued by large institutions such as banks and governments. 

Like fixed rate bonds they are usually issued in increments of £1,000 but they can also be purchased in smaller amounts depending on the size of your investment account. They are also traded in the secondary market on the bond market just like fixed rate bonds.

Another type of bond that is gaining popularity is the index-linked or "linked" bond. They are also referred to as "inflation protected" or "real return" bonds. The interest rate they pay is adjusted according to a specific price index or inflation rate, so they provide a real return in addition to interest. 

These bonds are often issued by governments and can be purchased through banks or brokerage firms. They can be bought in increments of a grand and almost always offer higher yields than traditional fixed-rate bonds.

In addition to buying individual bonds you can buy or sell an investment portfolio that is composed entirely of corporate and government bonds. 

This type of portfolio can be managed by one or more professional money managers who will analyse your needs and goals, determine how much risk you want to take on and then invest your money accordingly based on their analysis.


Quantitative Easing

When the government needs to raise money, which they sometimes call quantitative easing (QE), one of the ways they can do this is through issuing bonds. 

QE stands for quantitative easing. It’s a central bank term that describes when it expands the money supply by purchasing large amounts of government bonds from financial institutions. QE is used as a way to boost an economy during times of economic weakness.

Quantitative Easing

Theoretically, it has a number of benefits for the economy and its citizens. QE is an economic policy tool used by central banks to lower interest rates, increase the money supply, and increase spending. 

Most commonly it involves a central bank lowering the short-term interest rate to increase the amount of money that banks are willing to lend out. A bank, in turn, is more likely to loan out funds to businesses and individuals. QE is also used by central banks to increase the money supply and purchase large amounts of government bonds to increase the money supply.

Many countries have been conducting QE since the financial collapse of 2008. There are some significant concerns. One major concern is that if the Fed were to stop conducting QE and the rate remained above 2% the economy would experience a recession. 

So the question is: what can you do to escape the debt cycle? One of those ways is by investing in practical things with innate value:

  • ๐ŸŒณ Awareness 
  • ๐Ÿค Homesteads
  • ๐Ÿ‘ถ Family 
  • ๐Ÿ’Œ Community

FAQs

Why Do People Use Fixed-Rate Bonds?

Fixed rate bonds are interesting for long-term investors who want a guaranteed interest rate without worrying about rates going up and down. They’re also a good choice for borrowers who want to lock in a specific interest rate for a long period. 

Fixed rate bonds are generally issued by banks or other institutional investors. They’re usually sold to get a guaranteed return by the federal government. 

A fixed rate means the interest you’ll pay each month, or year, is the same. The rate may go down if interest rates fall, but it won’t increase either. 

Variable rate bonds could fluctuate in price more than once a year. If you’re sensitive to the uncertainty of rates, this could be a deal breaker. Before you choose a variable-rate bond, ask yourself if you’d be more comfortable with a fixed rate.

How Can I Buy a Fixed Rate Bond? ๐Ÿ“›

Fixed-rate bonds can be purchased with cash or via a bank account. Most financial institutions offer these bonds, with most offering at least one fixed-rate bond option. 

Depending on your circumstances and your desired rate of return, there are a few things you’ll want to keep in mind when choosing the right fixed-rate bond for you. 

First, you want to pick a fixed-rate bond that saves money for you the most over the longest period of time. So, you’ll want to look for a bond that comes with a low coupon rate (interest rate) and a long term. 

Next, you’ll want to find a fixed-rate bond that fits your financial goals and risk tolerance. This will help you decide if you’d rather go with a conservative bond that comes with fewer risks and higher stability or a higher-risk bond that comes with a higher interest rate and less stability

Should You Buy a Maturity Bond?

A maturity bond is basically an investment that promises to pay you back at the end of the term — and the end of the term is when the bond matures. 

A maturity bond will pay you back with the principal amount at the end of the term. That means you won’t be able to earn any interest on the principal amount. You’ll only be able to receive the interest that was originally paid by the bond issuer. 

This is an interesting option for those who expect to retire at some point in the future. If you expect to retire at a certain age, you can use the maturity bond to help you calculate how much money you’ll need to financially secure your future.

Should You Buy an Index-Linked Bond? ๐Ÿ—‚๏ธ

An index-linked bond is similar to a fixed-rate bond, except the interest rate on the index-linked bond is linked to an underlying index such as the S&P 500 or the FTSE 100. 

By linking the interest rate of an index-linked bond to an underlying index, you can potentially get a better interest rate on your investment. Plus, you can potentially earn interest on your bond that’s linked to the rise and fall of the stock market.


Final Word

Fixed-rate bonds can be a great way to save money for the future. There are, however, a few things that you should keep in mind before purchasing a fixed-rate bond. 

First, you need to make sure that you can meet the minimum financial requirements to open a fixed-rate bond. Some banks require a deposit of £2,500. Others may require you to have a minimum level of savings. 

You will also want to make sure that you can afford to make regular payments on your bond. A high-interest loan would be a considerably less flexible option than a fixed-rate bond. Consider that the UK seems to be going through inflation

Finally, you should make sure that the fixed-rate bond that you choose has a low risk of loss.