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Flurry of fixed savings deals arrive – but how do you choose the right one?
NS&I boosts rates on fixed-rate bonds by up to 5.17% AER
Matthew is an award-winning journalist, specialising in savings, tax and insurance.
National Savings & Investments (NS&I) has boosted rates on its fixed bonds, with some now paying over 5% AER. But they are not the only provider rolling out higher deals.
The number of fixed-term accounts paying 5% or more has surged in the past two months. Moneyfacts data shows there were just three such deals on 5 August. Today, there are more than 70.
With savers who lock their cash away rewarded with the best returns, how do you choose the right fixed bond for you?
NS&I hikes rates on fixed bonds
NS&I is one of the biggest household names to raise rates on its range of fixed-term accounts.
It's the fourth time the government-backed provider has hiked interest on these savings products since June and the latest push means it now offer some of the highest rates on the market.
Guaranteed Growth Bonds pay interest annually and Guaranteed Income Bonds pay returns into savers' nominated current accounts every month. Both allow you to invest between £500 and £1m.
This table shows the accounts ordered by term:
| Account | Previous rate | Rate from 6 October 2026 |
|---|---|---|
| One-year Guaranteed Growth Bonds | 4.82% gross/AER | 4.99% gross/AER |
| One-year Guaranteed Income Bonds | 4.72% gross/4.82% AER | 4.88% gross/4.99% AER |
| Two-year Guaranteed Growth Bonds | 4.81% gross/AER | 5.07% gross/AER |
| Two-year Guaranteed Income Bonds | 4.71% gross/4.81% AER | 4.96% gross/5.07% AER |
| Three-year Guaranteed Growth Bonds | 4.83% gross/AER | 5.1% gross/AER |
| Three-year Guaranteed Income Bonds | 4.73% gross/4.83% AER | 4.99% gross/5.1% AER |
| Five-year Guaranteed Growth Bonds | 4.85% gross/AER | 5.17% gross/AER |
| Five-year Guaranteed Income Bonds | 4.75% gross/4.85% AER | 5.06% gross/5.17% AER |
Source: NS&I
What's the difference between gross and AER?
Like many providers, NS&I lists rates using the terms gross and AER. The former is best understood as the flat rate of interest that's actually paid, while the latter takes into account the effect of compounding – the snowball effect of income earned from interest growing together with your original investment.
Understanding the difference between gross and AER matters when it comes to Income Bonds. Because returns are paid into your nominated bank account every month, interest isn't compounded.
The lower gross rate that NS&I quotes for those products is therefore a more accurate reflection of the amount of savings income earned over the course of a year.
NS&I is unusual in formally separating its fixed-term bonds by how they pay out. With most providers, it’s the same account and you make the decision of how interest will be paid when you apply. So, when choosing, consider if you really need interest paid out and whether it’s worth it.
- Find out more: what is National Savings & Investments?
How fast are fixed rates rising?
A better savings deal seems to be appearing almost every day. That’s because it probably is, with many fixed-rate deals now paying more than 5% AER for the first time in two years.
Just three topped 5% on 5 August 2026. By 8 October, there were 75, according to our analysis of Moneyfacts data.
Here are some of the latest fixed-rate deals announced last week:
- Investec Save: Rates on its two-year fix increased from 5.02% to 5.16%. Interest on a three-year fixed bond also climbed from 5.02% to 5.19%. The change means the deals are among the top five best on the market.
- Marcus by Goldman Sachs: Interest on its one-year fixed-rate account increased from 4.3% AER to 4.75%.
- Lloyds Bank: The high street brand's new Upfront Interest one-year bond pays 4% AER, plus an extra 0.2% if you hold a Lloyds Premier current account open for at least eight days. That's a lower rate than rivals, but instead of paying interest in instalments or a lump sum at the end, you'll receive 12 months' worth in the first month.
Our table shows the top fixed-term savings accounts, ordered by term:
| One-year fixed rate | OakNorth Bank | Fixed Term Savings Account | 5.13% | n/a | £1 | Internet, mobile app | Monthly, on maturity |
| Two-year fixed rate | OakNorth Bank | Fixed Term Savings Account | 5.18% | n/a | £1 | Internet, mobile app | On maturity (compounded annually) |
| Three-year fixed rate | GB Bank | 3 Year Fixed Rate Bond | 5.20% | n/a | £1,000 | Internet | Monthly, yearly |
| Four-year fixed rate | RECOMMENDED PROVIDER Aldermore | 4 Year Fixed Rate Account | 5.17% | 74% | £1,000 | Internet | Monthly, yearly |
| Five-year fixed rate | GB Bank | 5 Year Fixed Rate Bond | 5.37% | n/a | £1,000 | Internet | Monthly, yearly |
Table notes: rates sourced from Moneyfacts on 8 October 2026. Provider customer score is based on savers' overall satisfaction with the brand and how likely they are to recommend it to others. n/a means sample size was too small for us to generate a provider score.
- Find out more: best savings accounts
What's happening to savings rates?
This graph shows how average interest rates on fixed accounts have fared since August 2020:
Savings rates usually track the Bank of England (BoE) base rate. After 14 consecutive hikes between December 2021 and August 2023, the top savings rate hit 6.2% AER in October 2023. Rates then fell as the BoE started cutting.
The base rate has been 3.75% since December 2025, yet savings rates have climbed since March 2026 to their highest level since 2024. Why?
One factor could be expectations that higher inflation caused by conflict in the Middle East will prompt the BoE to raise the base rate in the future. But competition matters too. Strong demand for certain savings products can push rates higher.
Banks may also offer attractive deals to bring in deposits and hit their funding targets. That may certainly be the case when it comes to NS&I's latest round of rate hikes.
In August, the provider revealed it had raised just £1bn of its £15bn target in the first three months of its financial year. It has some serious catching up to do and will hope its new deals helps achieve that goal.
- Find out more: what are the different types of savings account?
5 things to consider when fixing savings
1. How long?
Generally, the longer you fix, the higher the return. Right now, the best rates are on fixes of more than a year.
Even if shorter fixes regain the edge, locking in a competitive rate today is still likely to earn more over five years than rolling over one-year fixes.
2. How much should you lock away?
Fixed-rate savings accounts are a great option for people with larger pots. Interest is guaranteed for the agreed term and locking the money away can also help curb the temptation to spend it.
However, it's wise to keep some cash in an instant-access savings account that can be withdrawn at short notice. Try to have enough money to cover you for three months. If you're retired, however, you may need much more to tide you over – think one to three years' worth.
3. When and where is interest paid?
Fixed-rate savings accounts pay interest monthly, annually or at the end of the agreed term.
Many accounts will add that interest to your nest egg but others pay it out to your current account. That can be useful if you need regular cash. But because that income isn't rolled back into your savings pot it won't benefit from compounding.
4. What's in the small print?
Remember to also check the small print before you open an account so you're fully aware of what happens when the bond matures.
If you don't tell your provider what to do next, the money will be automatically moved into either an instant-access account, back into your nominated current account or fixed for another term.
To avoid ending up on a worse rate, make a note in your diary of the date the term ends or set an alert on your phone a couple of weeks before. You can then start planning what you want to do with the cash and move the funds somewhere that suits you best.
5. Could you face a tax bill?
Big pots earning higher rates could mean you are at risk of being taxed on savings interest.
The personal savings allowance (PSA) is £1,000 for a basic-rate taxpayer, but that's halved to £500 for those paying the higher-rate of income tax. Additional-rate taxpayers don't have a PSA, meaning all their savings interest is subject to income tax. Any interest that exceeds the limit will be charged at your usual rate of income tax (20%, 40% or 45%).
From April 2027, the rates of income tax on savings interest are set to rise by two percentage points, meaning you could pay more on any interest above your allowance.
The best way to avoid falling into the savings tax trap is to open an Isa. Isas help you shield up to £20,000 a year from the claws of HMRC. From 2027, however, the amount you can pay into cash Isas will fall to £12,000 for savers under 65.
To use the full £20,000 Isa allowance, the remaining £8,000 would need to be invested in a stocks and shares Isa.
Premium bonds are another popular way to save without a tax burden. You can hold up to £50,000 in an account with NS&I and could win up to £1m in the monthly prize draw. The downside is that the chances of winning any cash prize are slim – just 21,000 to 1 – and you won't earn any interest on your investment.
- Find out more: tax on savings interest explained
