3 Year Fixed Rate Bonds

  • Earn a competitive fixed interest rate and have the peace of mind your savings are protected

  • Open with a single lump sum deposit

  • Know how much you’ll earn when your account matures

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Why should I choose 3 year fixed rate bonds?

There are several reasons to choose a 3 year fixed rate bond (also known as a fixed term deposit). If you have a lump sum that you can lock away for three years, you could benefit from an interest rate typically higher than ISAs or easy access accounts.

Is a 3 year fixed rate bond right 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 possible interest rate reductions over the next 36 months
3 Year Fixed Rate Bonds3 Year Fixed Rate Bonds3 Year Fixed Rate Bonds

What are 3 year fixed rate bonds?

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, such as six month, one year, two year and five year terms. It’s important to choose a suitable duration for your savings goals, as you won’t be able to access your money for the entire duration of the fixed term.

How do 3 year fixed rate bonds work?

You can open a 3 year fixed rate savings account by depositing a minimum lump sum, typically between £500 and £1,000, up to a maximum deposit amount of around £1,000,000 or £2,000,000. At Raisin UK, we fix the maximum deposit amount into savings accounts at £85,000 per person, per banking group to ensure the applicable deposit protection scheme still protects your money. 

The amount 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.

Once you’ve transferred your full deposit amount and opened your 3 year fixed rate bond, you’ll lock away your money for the duration of the fixed term during which time it will accrue interest. You’ll gain access to your deposit and the interest you’ve earned at the end of the fixed term.

What are the benefits of 3 year fixed rate bonds?

Opening a 3 year fixed rate bond locks in your savings account for three years, and frees you of the worry of variable interest rates. A 3 year fixed rate bond might be beneficial for you if the following benefits appeal to you:

  • Earn a fixed interest rate for three years 
  • Know exactly how much interest you’ll earn
  • Protected your money from any base interest rate changes

Are other fixed terms available?

Absolutely. Raisin UK offer the following fixed rate savings account terms:

 

The chart below shows different fixed rate bonds across different terms. It showcases how you can maximise the interest rates of long-term bonds over different periods of time.

Approach to multiple fixed rate bondsApproach to multiple fixed rate bondsApproach to multiple fixed rate bonds

How the interest you'll earn on a 3 year fixed rate bond is advertised

The interest you’ll earn on a 3 year fixed rate bond is advertised as an annual equivalent rate (AER). How much you earn will be determined by the following criteria:

  1. The duration of your fixed term
  2. How much you deposit
  3. The interest rate (AER)
  4. How the bank pays interest

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 the interest you'll earn on a 3 year fixed rate bond is advertised

The interest you’ll earn on a 3 year fixed rate bond is advertised as an annual equivalent rate (AER). How much you earn will be determined by the following criteria:

  1. The duration of your fixed term
  2. How much you deposit
  3. The interest rate (AER)
  4. How the bank pays interest

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 pay interest directly to you at regular intervals, some banks compound interest and others 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. 

How do I get the best interest rate on a 3 year fixed rate bond?

3 year fixed rate bonds are an excellent choice for those who can stash their money away for three years and want to earn a solid savings rate. You want to make sure you start out with a competitive rate that you are happy with, as a lot can change with fluctuating markets over a three year term. If interest rates climb, you may find yourself locked into a lower rate. If interest rates fall, yours will be locked in at a positive rate. This is why finding the best rate to begin with can offer a sense of security.

Choosing a high street bank may seem like the most stable and safe option, but sometimes big name places don’t always offer the best deals. The most competitive rates can usually be found with smaller challenger banks. Comparing the market can highlight the best deal for you.

Our best 3 Year Fixed Rate Bond rate is 1.30% AER

No matter how small the interest rate drop is, every little helps when it comes to getting the best out of your bond and making your money stretch further. High street banks may have dropped their rates over the past few years, but Raisin UK still has the edge when it comes to boosting your fixed rate bond earnings. Take a look at the numbers and see how we compare when it comes to 3 year fixed rate bonds on the high street.

How do I find the best 3 year fixed rate bond for me?

The best way to get a 3 year fixed rate bond that is suited to you is to compare the market. You should also check the small print on different offers to see if there are any penalties for early withdrawals and see which pay out system works best for you.

Before committing to any kind of fixed rate bond, it’s always useful to do some financial planning to make sure that locking away a lump sum for three years won’t leave you in a tricky situation.

What to consider when opening a 3 year fixed rate savings account

  • Whether the term is appropriate for you
  • How much you can afford to lock away for this time
  • 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, your fixed rate bond interest rate won’t 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.

Do I pay tax on 3 year fixed rate bonds?

You may need to pay tax on your 3 year fixed rate bond depending on how much interest you earn and when and how the interest gets paid out. In the year the interest becomes available to be withdrawn it also becomes taxable. Depending on your income tax band, you may be able to enjoy your interest tax-free if it falls within the personal allowance threshold. Basic rate taxpayers currently have to pay tax on savings interest over £1,000, and higher rate taxpayers have to pay tax on interest over £500.

What happens at the end of three years?

At the end of your three year term, you’ll have the option to choose one of the following:

  1. Accept a renewal offer (if one is available) 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 matured funds to another savings account
  3. Withdraw your original deposit plus the interest and close the account

When will I get my money at the end of my term?

If you choose a 3 year fixed rate bond, your cash will be stashed away for the full three year term. Most places don’t allow early withdrawals, and if they do, there will often be a penalty. After the three year term, you will have the option to withdraw the money to your bank account. This process usually takes eight days from receiving confirmation your money can be withdrawn to the funds landing in your nominated account.

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 X.XX% AER. 

If you need a savings account with more flexibility, an easy access or 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.

Generally speaking, fixed rate bonds are a good investment if you’re looking to earn a competitive fixed rate of interest. Before committing to a fixed rate bond, you should always consider whether you are willing to lock your money up for the fixed term. 

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No. You won’t lose money with a 3 year fixed rate bond as long as you adhere to the terms of the account and avoid withdrawing your money before the end of your term. As your bond reaches maturity, you’ll get all your money back along with the interest your investment has earned. The best way to make sure that you don’t lose money is to have access to emergency funds in other places. If you have to withdraw money from the bond early, this may mean paying a penalty and ultimately getting less out than you put in.

If you see your bond through to the end of the term, you are guaranteed to earn the interest agreed when you opened the account.

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Yes, as long as the financial institution you use is UK-regulated. The FSCS offers deposit protection for 3 year fixed rate bonds up to £85,000 (including interest) per person, per banking group. This gives you peace of mind that you can recover this amount should your bank fail.

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Usually, you can only deposit money into your 3 year fixed rate bond at the beginning of term. This gives your money the best chance to grow and any further additions aren’t normally possible. However, you can open more than one fixed rate bond, so you could take that lump sum you were planning to add and open a shorter fixed rate bond over one or two years instead.

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Many places won’t let you withdraw money early from your 3 year fixed rate bond, and those that do will likely charge a penalty. It’s best to make sure you won’t need access to the money before you open your fixed rate bond account. A budget plan can help you to make this decision.

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Most providers won’t allow you to top up or add money to an existing 3 year fixed rate bond. It’s best to pay in as much as you can afford at the beginning. This deposited amount will be the amount that stays in the bond until the end of the term. If you’d prefer to open a savings account that you can pay into more regularly, a notice account or an easy access savings account may be a better option for you.

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If a 3 year fixed rate bond doesn’t sound like the right solution for you, there are other options. You could opt to split your money between a 2 year fixed rate bond and a 1 year fixed rate bond so that you can withdraw money earlier than a full three years. You could also opt for a more flexible type of savings account that you can withdraw from if the idea of not having access to your money makes you uncomfortable.

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You can open more than one fixed rate bond, and you can open multiple fixed rate bonds with different term lengths. In fact, it may work out better to have more than one fixed rate bond at a time as you will always have money maturing in an account even when another term has ended.

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