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What is a fixed rate bond?

18th February 2026

A fixed rate bond is a type of savings account where you deposit a lump sum of money and allow it to grow at a guaranteed interest rate over a set period.

With fixed rate savings bonds, the interest rate and length of the account term are locked in and won’t change. This means that even though you won’t have access to this money for a pre-determined amount of time, you’ll have the confidence in knowing exactly how much interest you’ll earn on your savings by the time the bond reaches the end of its term.

Ready to learn more about fixed rate bonds?

In this guide, we’ll dive deeper into the question of ‘What is a fixed rate bond?’, exploring the following:

How do fixed rate bonds work?
► How long do fixed rate bonds last?
► How many fixed rate bonds can I have?
► Are fixed rate bonds safe?

What happens when your fixed term ends?

Do you pay tax on fixed rate bonds?

Is a fixed rate savings bond right for you?

► The benefits of fixed rate bonds
► The considerations of fixed rate bonds

How do fixed rate bonds work?

Fixed rate bonds, also known as fixed rate savings accounts or fixed bonds, work by letting you lock away a lump sum of money for a set period in return for a guaranteed rate of interest.

You can generally open a fixed rate bond by depositing a single lump sum into your account. When you do this, you’ll agree with your provider to lock your money away until the end of the fixed term.

Unless stated by your provider, you typically won’t have access or be able to make more deposits into your account during the fixed term. However, your money will continue to grow by earning interest at the fixed rate.

Click below to see how a typical fixed rate bond works in practice.

  • How a fixed rate bond works in practice

    1. Choose your fixed rate bond
    Compare interest rates and term lengths to find the account best suited to your savings goals.
     

    2. Deposit your money
    Pay in a lump sum you are comfortable setting aside, making sure you meet the provider’s minimum deposit requirement. For example, our minimum deposit on our fixed rate bond savings products is £1,000. We allow you 14 days to add your money to your bond. After this period, you won’t be able to pay any additional money in.

    3. Earn interest
    Allow your savings to grow at the fixed rate. Your interest will usually be paid monthly, annually, or at the end of the term, known as maturity.
     

    4. Maturity
    At the end of the term, you’ll receive your original deposit plus any interest earned. Once your account matures, you’ll usually have the option to withdraw your savings or transfer them into a new account.
     

    Make sure to read your provider's terms and conditions before opening your savings account.

    How long do fixed rate bonds last?

    How long do fixed rate bonds last?

  • Show more
    • How much can you put into a fixed rate bond?

    How much can you put into a fixed rate bond?

  • Show more
    • How many fixed rate bonds can I have?

    How many fixed rate bonds can I have?

  • Show more

  • Fixed rate bonds run for a fixed period of time – usually between one and five years. In general, the longer you lock your money away, the higher the interest rate may be (this may not always be the case).

    Our savings bonds come with the following term lengths:

    • 1 year fixed rate bonds 
    • 2  year fixed rate bonds 
    • 5 year fixed rate bonds

  • The amount you can deposit into a fixed rate bond depends on the provider. Most bonds have a minimum opening balance, and many also set a maximum limit.

    For example, a provider may require a minimum deposit of £1,000 to open the account. At Leek Building Society, you can invest up to £250,000 in a fixed rate bond.

    It’s always worth checking the product terms carefully, as limits can vary between providers and products

  • You can have as many fixed rate bond savings accounts as you like, as long as you have the required minimum deposit and meet the eligibility rules. 

    However, just because you can open multiple savings bonds doesn’t necessarily mean it’s the best solution for you. 

    Keep in mind that each fixed rate bond locks your money away for a set amount of time and comes with different fixed rates. So, if you’re considering holding more than one bond, ensure that you have enough accessible funds for your everyday expenses and those unexpected rainy days.

    Some savers do choose to spread their money across multiple bonds, with different rates and maturities. For example, you may decide to have separate bonds that mature after one, two and five years. Doing so could see you benefit from potentially higher interest rates on longer-term bonds, while giving you regular access to funds as each bond matures. This approach is referred to as a fixed rate bond ladder.

    Whether you decide to open one fixed rate savings bond or several, it’s important to ensure the terms of the account work for you and align with your financial plans.

What happens when your fixed term ends?

When the term of your fixed rate savings bond ends and reaches maturity, you’ll receive your initial deposit plus any interest you’ve earned.

The next step will depend on your provider. Some banks and building societies will transfer your bond savings to an instant access or easy access account. Here, you’ll be able to access your account and take money out whenever you wish.

You should also have the option to:

  • Withdraw your money and use it as you wish
  • Reinvest your savings into another fixed rate bond
  • Transfer your savings to a different account or provider

Make sure to keep an eye out for any communications from your provider before your bond matures. Your provider should explain your options and any deadlines. 

If you have a fixed rate bond with us, we’ll write to you at least 14 days before your account matures. We’ll explain how you can reinvest your savings with us or how to withdraw your money. If you take no action, we’ll automatically reinvest your fixed rate bond savings into our Easy Access Savings Account. Here, your savings will continue to earn interest at the current rate. You can also withdraw your money or move it to another account.

Discover our 5 year fixed rate bond - 4.05%

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Do you pay tax on fixed rate bonds?

Interest on a fixed rate bond is typically calculated as gross. This means it’s paid before any tax is deducted. Any interest you earn on your fixed rate bond is classed as income, so it could be subject to tax. 

Depending on your income tax band, you may be able to earn up to £1,000 in savings interest each year tax-free under your Personal Savings Allowance.

Visit this page for more information on savings tax: Tax on savings interest: How much tax you pay - GOV.UK.

A fixed rate Cash ISA (Individual Savings Account) is a tax-free alternative if you want to earn interest without worrying about tax. Cash ISAs operate in a similar way to a fixed rate bonds but with tax-free growth. Discover our range of ISA accounts.

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Is a fixed rate savings bond right for you?

Fixed rate bond accounts are ideal for people who have money set aside that they’re happy to lock away – typically anywhere between one and five years – without needing immediate access to it. 

These types of accounts are great if you’re looking to achieve your long-term savings goals, such as:

► Holiday’s
► Major life events: Moving house, home renovations, weddings, starting a family, etc
► Education costs
► Retirement funds
► Future known expense
► Other emergency funds

Before you open a fixed rate bond, you should understand these benefits and considerations.

  • The benefits of fixed rate bonds

    Guaranteed interest rate
    When you open a fixed rate bond, the rate of interest is locked in and fixed for the full term. You’ll know exactly how much your money will grow.
     

    Protection from rate drops
    If market interest rates fall, your interest rate won’t decrease.
     

    Competitive returns for lump sums
    By locking your money away for a set period, you may earn a higher interest rate than other savings products, such as easy access accounts.
     

    Flexible fixed terms
    You can choose the fixed term that suits your savings goals, such as 1, 2, or 5 years.
     

    Your savings are secured
    Your funds are covered up to £120,000 per person, per authorised institution under the FSCS.
     

    Open multiple accounts
    You can open more than one fixed rate bond to create a savings ladder to manage your various savings goals.
     

    Savings discipline
    As you’re unable to access your money during the fixed term, you won’t have the temptation to withdraw your funds to spend unnecessarily, helping you build a discipline that allows your savings to grow.
     

    Peace of mind
    Fixed rate bonds help set your money aside for the future, making them ideal for medium and long-term savings goals.

  • The considerations of fixed rate bonds

    Limited access to funds
    Unless stated by your provider, you typically can’t withdraw money from your fixed rate savings bond until it matures. However, this does help you build savings discipline, removing the desire to make impulse withdrawals and purchases.
     

    No regular deposits
    Most fixed rate bonds only allow you to make a one-off deposit when opening the account. We'll give you14 days to make your initial deposit, allowing you time to decide how much you want to add to your account – as long as it meets the minimum deposit requirements.
     

    Missed opportunities if rates rise
    Your interest rate is fixed. So, if rates increase, your bond won’t benefit. However, if you notice a rate that is of interest, you can open another bond or other savings account.
     

    Minimum deposit requirements
    Most bonds require you to make a minimum deposit to open the account. Our fixed rate bonds can be opened with a minimum deposit of £1,000. If you don’t feel comfortable depositing this much money, there are other types of savings products available.
     

    Tax considerations
    As mentioned, with a fixed rate bond, any interest earned above your Personal Savings Allowance is taxable. If this isn’t for you, you may want to consider a different savings account, such as a Cash ISA – where you can benefit from tax-free interest.

Rounding up our guide on fixed rate bonds 

Before you open a fixed rate bond, carefully consider your financial situation and how long you can comfortably leave your money locked away.

If you’re looking for a safe, secure, and steady way to grow your savings with predictable returns, a fixed rate bond could be your ideal solution.

Remember to always read the terms and conditions of the fixed rate bond to ensure you’re comfortable opening an account. If needed, speak to a savings specialist and ensure your decision aligns with your savings goals.

Unsure what savings account is right for you? You may find this guide helpful: What is the best savings account for you?

Ready to open a fixed rate bond?
Apply for a fixed rate bond

 

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