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5 myths about fixed-term savings accounts busted
With savings rates falling, is now the time to fix?
Opening a fixed-term savings account can help protect your money from future rate cuts. But many savers are still reluctant to lock their cash away, new research shows.
A survey of 2,000 people by investment platform Hargreaves Lansdown found just 26% are willing to fix their savings. It also highlighted confusion: 8% said they weren't happy to fix but didn't know why, while 9% admitted they didn't understand how fixed-rate accounts work.
Here, Which? debunks common myths about fixed-term savings accounts, and explains why they're worth a second look.
Myth 1: You'll get the best rate by fixing for longer
Usually, the general rule of thumb is that the longer you fix, the better the returns. That trend was turned on its head during the savings boom of the past few years, with shorter-term bonds promising the best interest instead.
Now the gap between the various fixed-term products has closed, with little difference between a one-year and five-year deal.
The table shows the top fixed savings accounts, ordered by term:
| One-year fixed rate | Tandem Bank | 4.44% | £1 | Internet, mobile app | Yearly |
| Two-year fixed rate | Secure Trust Bank | 4.42% | £1,000 | Internet | Yearly |
| Three-year fixed rate | Birmingham Bank | 4.43% | £5,000 | Internet | Yearly |
| Four-year fixed rate | JN Bank | 4.40% | £100 | Internet | Yearly |
| Five-year fixed rate | Birmingham Bank | 4.43% | £5,000 | Internet | Yearly |
Table notes: sourced from Moneyfacts on 27 May 2025. Rates are subject to change.
Rates are similar for all types of fixed bond, ranging from 4.4% AER to 4.44%. But putting your money in an account lasting two to five years could still leave you better off in the long run.
Savings rates are tumbling and if you only fix for up to 12 months, you may have to settle for a much lower rate when it's time to reinvest the money.
- Find out more: best savings rates 2025
Myth 2: You could miss out if rates go up
While a fear of missing out was an understandable reason for not fixing in the past, the market has changed considerably over the last couple of years.
On 1 October 2023, the average rate on a one-year fix hit a high of 5.42% AER. That was partly down to the Bank of England's (BoE) decision to hike the base rate 14 times in a row.
While the base rate was held steady for a while, it's been cut four times since last August and savings rates have dropped with it. The average one-year bond offered 4.11% AER on 1 May 2025, down from 4.19% on 1 April 2025.
Further base rate cuts are expected this year, which could lead to additional falls in savings rates. That means fixing now could help you secure a better deal than waiting.
And if you're holding out for higher rates, bear in mind that money left in a current account is likely earning little or no interest – and inflation, which rose to 3.5% in the 12 months to April 2025, could erode its value over time.
- Find out more: is it time to fix your savings?
Myth 3: You need a big lump sum to open a fixed account
Not everyone wants to lock away a large sum for a year or more – even if the interest rate is competitive. But fixed-term savings accounts aren't just for those with thousands to spare.
Our analysis found that around a quarter of all fixed-term deals accept opening deposits of £1,000 or less.
The best one-year account from Tandem Bank can be opened with just £1, while JN Bank's four-year bond only needs £100 to get started. Our analysis found a quarter of all fixed-term deals allow an opening deposit of £1,000 or less.
Myth 4: It's safer to use a big bank
Lesser-known providers have been leaving high street banks in the dust with their savings rates over the past couple of years, and today's top deals are almost exclusively offered by smaller financial firms.
If you’re unsure about saving with a name you don’t recognise, check whether it’s covered by the Financial Services Compensation Scheme (FSCS), which protects up to £85,000 if the provider fails.
Some smaller firms aren’t banks but are authorised by the Financial Conduct Authority and must safeguard your money by holding it in ring-fenced accounts with FSCS-protected banks.
It's also a good idea to check what features the provider offers to ensure your banking app is as secure as possible, minimising the impact if your phone gets stolen.
Many digital banks have location-based protections to prevent fraudulent payments where the location of the card and the app don't match. Others use biometric technology, such as your voice and face, to secure the app.
- Find out more: do you know where your savings are really held?
Myth 5: It's impossible to access emergency cash
Fixed-term savings accounts are designed to lock your money away in exchange for a guaranteed rate, but that doesn't mean access is completely off the table.
Withdrawal rules vary by provider. Some providers simply won’t allow it, while others only allow you to break the contract in exceptional circumstances or apply penalties such as interest lost.
Tandem Bank, for example, allows early withdrawals only in cases of financial hardship, assessed individually. Meanwhile Barclays offers more flexibility, letting customers make up to three partial withdrawals for up to 10% of the balance, or close the account and incur a 180-day loss of interest.
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