We use cookies to allow us and selected partners to improve your experience and our advertising. By continuing to browse you consent to our use of cookies. You can understand more and change your cookies preferences here.


When you click on a retailer link on our site, we may earn affiliate commission to help fund our not-for-profit mission.Find out more.

12 May 2019

Revealed: the best fixed-rate bonds lasting less than two years

Atom Bank and Charter Savings Bank have launched new one and two-year deals

Both Atom Bank and Charter Savings Bank launched new fixed-term bonds in recent weeks - and you won't have to lock your money away for five years to benefit. But how do these new accounts measure up in an increasingly competitive market?

The new offerings are the latest bid from savings providers to win over new customers looking to earn as much interest as possible on their savings. But if you're looking for the best home for your nest egg, you're likely to earn better returns from other providers.

We reveal the the best deals on the market for one and two-year bonds, and looks at the pros and cons of fixed-rate accounts.

Be more money savvy

Get a firmer grip on your finances with the expert tips in our Money newsletter – it's free weekly.

This newsletter delivers free money-related content, along with other information about Which? Group products and services. Unsubscribe whenever you want. Your data will be processed in accordance with our Privacy policy

Best one-year short-term fixed-rate bonds

In recent weeks, providers have been vying for savers' deposits, with a number launching new products and upping their rates.

If you're willing to lock your savings away for 12 months, Atom Bank's new bond offers 2.03% AER on your savings and you can open an account with just £50.

Meanwhile, Charter Savings Bank has raised the rate of its fixed-term one-year bond to 1.98% AER.

However, both these rates trail behind the best in the market. At Al Rayan Bank, for example, you could earn up to 2.17%. Keep in mind that this is an expected profit rate, rather than an interest rate, meaning there is a small possibility your returns may be lower, although you'll be notified in advance if this is the case.

The table below shows the best-rate one-year fixed-term bonds.

AccountAERMinimum initial deposit
Al Rayan Bank2.17%*£1,000
My Community Bank2.05%£1,000
Atom Bank2.03%£50
Metro Bank2%£500
United Trust Bank2%£5,000

*Expected profit rate. This is how much you can expect to earn on deposits into the account.

Top two-year short-term fixed-rate bonds

If you're prepared to put away your cash for longer, Atom Bank has also launched a market-leading two-year deal, which pays 2.03% AER interest on your savings.

Once again, however, you could be better off with another provider. Al Rayan Bank offers returns of 2.42%, while Bank of London and the Middle East pays up to 2.4%.

That said, the other top five all require an initial deposit of £1,000, so Atom Bank's modest minimum of £50 may appeal to those with smaller holdings.

Below are the top-rate two-year fixed-rate bonds on the market.

AccountAERMinimum initial deposit
Al Rayan Bank2.42%*£1,000
Bank of London and Middle East2.40%*£1,000
My Community Bank2.35%£1,000
Atom Bank2.30%£50
Gatehouse Bank2.30%*£1,000

*Expected profit rate. This is how much you can expect to earn on deposits into the account.

How do fixed-rate bonds work?

Fixed-rate bonds allow you to earn interest on your savings by locking your money away for a set period of time.

As a general rule, the longer you store your money away, the bigger the returns.

While interest rates for these accounts can be attractive, savers should be aware that they are giving up access to their money for the full term. Even where withdrawals are allowed, you may face a hefty penalty.

For this reason, you should think carefully about how long you can afford to commit your cash. A one or two-year bond may be more realistic for your finances than a five-year commitment, even if the interest is somewhat lower.

Is your money at risk of being trapped?

Once the term ends, you'll need to decide what to do with your cash - and savers could see their money trapped if they don't act.

Generally, your bank or building society will contact you up to 35 days before the term finishes so you can instruct them what to do with your savings.

If you don't respond, most providers will put your money into an easy-access account paying low amounts of interest.

A handful, however, will automatically reinvest the deposit in a similar fixed-rate savings product. This effectively locks away your cash for the same period again, and possibly at worse interest.

So, when your fixed-rate term is up, make sure you take note and shop around for a new home for your savings.

Alternatives to fixed-rate bonds

If you don't think a fixed-rate bond is the right product for you, there are alternatives available.

Regular savings accounts

Regular savings accounts require you to make monthly deposits up to a certain limit. These accounts may also limit the number of withdrawals you can make each month.

Easy-access savings accounts

Easy-access savings accounts allow you to withdraw money quickly and easily. However, interest rates tend to be comparatively low.

Notice savings accounts

Notice savings accounts require you to give notice ahead of withdrawing money. These periods can range from 30 to 60 days.

Cash Isas

Cash Isas allow you to save up to £20,000 tax-free each financial year. As with traditional savings accounts, there are instant access cash Isas, fixed-rate cash Isas and regular savings cash Isas, so you can choose a product that suits your own particular saving style and financial circumstances.

Stocks and shares Isas

A Stocks and shares Isa is a tax-free investment account that allows you to put your money into a range of different investments, but you should only invest if you're prepared to risk your money dropping in value.

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular T&Cs of a provider before committing to any financial products.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.