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3 Year Fixed Rate Bonds

What are the benefits of a 3 Year Fixed Rate Bond?

There are several reasons why you may want to choose a 3 Year Fixed Rate Bond (also known as a Fixed Term Deposit). If you have a lump sum that you are prepared to lock away for three years, you could benefit from an interest rate that is typically higher than that of an ISA or Easy Access account with a 3 Year Fixed Rate Bond. Although you won’t have access to your savings until the end of the three years, you’ll benefit from a competitive rate compared to more flexible savings accounts.

See if a 3 Year Fixed Rate Bond is good for you

  • You don’t need to access your savings for three years
  • You want to know how much interest you’ll earn at the end of the three-year term
  • You want to protect your savings from a possible reduction in interest rates over the next 36 months
3 Year Fixed Rate Bonds3 Year Fixed Rate Bonds3 Year Fixed Rate Bonds

3 Year Fixed Rate Bonds

If you have a lump sum to invest, a 3 year fixed rate bond could be ideal, especially if you want to protect yourself from falling interest rates.

Fixed rate bonds typically offer higher interest rates than easy access savings accounts or ISAs and the interest rate doesn’t change for the duration of your term. That means you get a good level of stability and certainty for your savings.

What is a 3 year fixed rate bond?

A 3 year fixed rate bond is a type of savings account that locks in your money at a fixed rate of interest for three years. You may also hear 3 year fixed rate bonds called 3 year fixed term deposits, 3 year fixed rate savings, 3 year fixed rate savings bonds and 3 year fixed rate savings accounts.

By opening a 3 year fixed rate savings account, the rate of interest you earn won’t change for 36 months. That means the rate stays the same for three years, irrespective of changes to the base interest rate. To open a 3 year fixed bond, you can make multiple transfers until you have reached a lump-sum deposit amount and then your money is locked in for the duration of your term.

If three years sounds too long (or too short), you can also apply for fixed rate savings accounts of different terms. Six month, one year, two year and five year bonds are also available. It’s important to choose a duration that’s most suitable for your savings goals. Remember, you won’t be able to access your deposit for the whole term.

What are the benefits of a 3 year fixed rate bond?

Opening a 3 year fixed rate bond is an effective way of gaining certainty over what you’ll earn from your savings. You’ll be locked into your savings account for three years, so it’s essential to find the best fixed rate bond that works for your needs.

If you can deposit a lump-sum that you can’t touch again for 36 months, a 3 year fixed rate bond might be beneficial for you because:

  • Your interest rate will be fixed for three years
  • You’ll know exactly how much interest you’ll get
  • Your deposit is protected from any changes to the base interest rate
  • It’s easy to plan as you know exactly how long your term is

How do 3 year fixed rate bonds work?

You can open a 3 year fixed rate savings account by depositing a lump sum. This lump sum is then locked away to earn interest until your term ends three years later, meaning that you won’t be able to access the money you’ve deposited during this time.

Like other fixed rate bonds, 3 year bonds have a minimum deposit amount. Normally this is between £500 and £1,000. The maximum deposit amount can go up to around £1,000,000 or £2,000,000 through some banking groups, but at Raisin UK we fix the maximum deposit amount into savings accounts at £85,000 per person, per banking group. This ensures you are still protected by the applicable deposit protection scheme.

The amount that you can deposit varies between providers, so do make sure you check and apply for the account that suits your needs. It isn’t possible to make deposits into your account after your initial deposit, nor is it usually possible to close a fixed rate bond early.

How is the interest you earn on a 3 year fixed rate bond calculated?

The interest you’ll earn on a 3 year fixed rate bond is calculated as a yearly percentage, or annual equivalent rate (AER). How much you earn will be determined by:

  1. The duration of your fixed rate, in this case three years
  2. How much you deposit
  3. The interest rate (AER)
  4. How interest is earned according to the bank

Taxpayers can earn interest on savings up to certain amounts without paying tax on that interest. Basic rate taxpayers can earn up to £1,000 of interest per year, and higher-rate (40%) taxpayers can earn interest of up to £500 per year.

How is interest paid on a 3 year fixed rate savings bond?

As with all fixed rate savings accounts, when you earn interest depends on the bank. Some banks compound interest and others only pay at maturity. At Raisin UK, you’ll usually only have access to the interest you’ve earned at the end of the fixed term, but some savings accounts may pay out interest to your Raisin UK Account sooner. You can find out how interest will be paid by reading the details of the account you want to apply for.

What happens at the end of three years?

At the end of your three fixed years, you’ll be able to do one of three things:

  1. Accept a renewal offer to open a new fixed rate bond from the same bank with your original deposit amount and choose to withdraw or deposit the interest you’ve earned
  2. Move your savings to another account
  3. Withdraw your original deposit plus the interest and close the account

What to consider when opening a fixed rate savings account

  • The term, which in this case is three years
  • The sum you can afford to lock away for this time
  • The deadline for your deposit
  • How often interest is earned
  • Deposit protection

It’s also worth considering that the Bank of England base rate of interest, otherwise known as the bank rate, could change. If the Bank of England base rate increases, it doesn’t mean the interest rate of your fixed bond will increase. The rate of interest that you earn will always stay the same. Conversely, if interest rates drop, the rate of your 3 years fixed rate bond won’t drop.

How many fixed rate bonds can I open?

You can apply for as many fixed rate savings accounts as you like. Just be mindful that if you open more than one savings account with the same banking group, your combined balance contributes towards your deposit protection total.

Financial protection for 3 year fixed rate bonds

The Financial Services Compensation Scheme (FSCS) offers deposit protection for savings accounts from regulated UK banks. This protection covers deposits of up to £85,000 (including interest) per person, per banking group. If your bank fails, this is the maximum amount you could potentially recover.

All of the fixed rate savings accounts you’ll find in the Raisin UK marketplace include deposit protection, with savings accounts from UK banks featuring FSCS protection.

Benefits of 3 year fixed rate savings accounts through Raisin UK

You can choose from a range of 3 year fixed rate savings accounts from UK banks through our marketplace. All of these accounts are free to open and can be managed and accessed in one place. Currently, the highest interest rate for a 3 year fixed rate bond is 1.10% AER.

Register and log in to apply for the best 3 year fixed rate savings bond for you from the table above.

If you need a savings account with more flexibility, a notice account may be more suitable.

How to open a Raisin UK account

You can open a Raisin UK Account to apply for savings accounts at Raisin UK in three easy steps. Log in, click to apply for a savings account, transfer your deposit. That’s it. Once your application is approved, you’ll begin earning money from your savings. If you have any questions, our UK-based Customer Services Team will be happy to help.

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