Best 2-Year Fixed Rate Bonds

The best 4 for you to choose from.

Updated: June 13, 2024
Matt Crabtree

Written By

Matt Crabtree

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Have a lump sum of cash burning a hole in your pocket? You can save that money with a two-year fixed rate bond and earn interest.

You can make interest on your savings by depositing them into an account and locking them away until the end of the two years.

Two-year fixed rate bonds are a great way to earn more money on extra savings. In this article, you'll learn about fixed rate bonds and how interest is paid on your savings, and we've picked the best for you to choose from.

ProviderScoreDetails
1. Ford Money★★★★★Learn more
2. Smart Save★★★★★Learn more
3. Atom Bank★★★★Learn more
4. Vanquis★★★★Learn more

What Are 2-year Fixed Rate Bonds?

A fixed rate bond is a savings account that allows you to lock away money for a fixed period. At the beginning of your application, you'll be given a fixed interest rate (the Annual Equivalent Rate) and be required to add a minimum deposit into the account for a fixed term.

A fixed rate savings account guarantees you'll earn interest from your savings, and you'll know exactly how much you'll make before you deposit into the account. Typically, the longer the fixed term, the more interest you'll earn on your savings.

However, most fixed-rate bonds won't allow you to access money early, so you must wait until maturity to access your funds.

You may wonder if a fixed rate bond savings account is the right option. And it very well could be. To help you decide, we've listed the benefits and drawbacks of opening a fixed rate bond savings account.

Benefits of Fixed Rate Bonds

✔️ With a guaranteed interest rate, you'll make more of your savings. Due to the fixed nature of these bonds, you can save safely and consistently.

✔️ Unlike other investment approaches like stocks, you're protected against inflation. You'll know exactly how much you'll earn beforehand, eliminating risk.

✔️ You can choose the term; usually, fixed periods range from one to five years.

✔️ You can have multiple fixed rate bonds at once.

Drawbacks of Fixed Rate Bonds

❌️ The main issue some people have with fixed rate bonds is the inability to withdraw money early.

❌️ Early access is sometimes granted under exceptional circumstances, but there are usually heavy penalty fees for doing so.

Factors to Consider When Choosing the Right Fixed Rate Bond

A two-year fixed rate bond is ideal for increasing your savings over a few years.

There are different factors to consider when looking for the most suitable fixed rate bond. We've compiled a list of factors for you to look out for:

  • FSCS logo: when looking for a fixed rate bond, ensure your savings are protected by the financial services compensation scheme (FSCS). You'll usually find an FSCS logo on the website, meaning funds up to £85,000 will be protected.
  • Personal savings allowance: depending on your tax bracket and the interest paid, you may have to pay tax on your savings. Before filling out an application, check how much you may pay tax to ensure it's worth it.
  • Minimum deposit requirements: minimum deposits vary depending on the savings provider. You can expect to pay between £1,000 and £10,000 for a minimum deposit for most fixed rate bonds.
  • Interest rates: look at different fixed rate bond savings accounts. Some providers will offer competitive interest rates you can take advantage of.
  • Penalty fees: although most fixed rate bonds don't allow easy access to funds before the fixed term, some do, but it usually has to be under individual circumstances, and there are usually penalty fees for early withdrawals.
  • Maturity period: when the fixed term has ended, this is when your bond has matured. If you need easy access to your savings, there may be a more suitable savings account. However, if you're happy to leave your savings alone to mature for a couple of years, then a fixed rate bond is the ideal option.

How Is Interest Paid on a Fixed Rate Bond?

With some fixed rate bonds, interest is paid monthly; for most, it's paid annually. Interest is calculated daily and paid monthly or at the end of a fixed term.

With monthly interest fixed rate bonds, you can have the money paid into another account or added to the savings within the bond account. With annual interest, you'll have the interest paid once the bond has matured.

You'll find that most bonds will offer a higher interest rate for longer fixed terms, so the longer you lock away your money, the more interest you'll accrue.

How much interest you make on your savings will depend on the agreed rate, but for example, if you have £10,000 for a fixed term of 2 years with an interest rate of 4.50%, once the bond has matured, you'll have a total of £10,450.

So, now that you know how interest is paid, we've compiled a list of the best two-year fixed rate bonds you can choose from.

The Best 2-Year Fixed Rate Bonds

To help you search for the most suitable ‌two-year fixed rate bond, we've researched and found of the top accounts that will help you maximise your savings.

Let's dive right in.

1. Ford Money Fixed Saver

With the Ford Money Fixer Saver account, you can gain interest on your savings with the option of interest being paid monthly or annually.

You can make unlimited deposits in the first 21 days of opening an account, and there's a 14-day cooling-off period — after this, your money is locked away for the next two years.

Key Features:

  • Interest rate: 4.50% AER annually or 4.41% AER monthly
  • Deposit amount: £500 to £2,000,000
  • Fund access: permitted once the bond matures

Other Benefits:

  • A smaller minimum deposit than other fixed rate bonds.
  • You can open a single or joint account.
  • You can choose to have interest paid either monthly or annually.
  • If interest rates increase before you deposit money, you can benefit from the new rate with Ford Money's best rate guarantee.

2. Smart Save 2-Year Fixed Rate Saver

Save your money with Smart Save's 2-Year Fixed Rate Saver, where interest is compounded, calculated daily, and paid annually.

You can open an account within ten minutes with their quick and easy online application and manage your account online too.

Key Features:

  • Interest rate: 4.71% AER annually
  • Deposit Amount: £10,000 to £85,000
  • Fund access: no early withdrawals

Other Benefits:

  • You can open and access your account online.
  • Take advantage of competitive rates for two-year bonds.
  • Interest rates compound so you can make the most of your savings.
  • Great UK support team to help you along the way.

3. Atom Bank 2-Year Fixed Saver

The Atom Bank 2-Year Fixed Saver account allows you to start saving from as little as £50 up to £100,000. You can apply, manage, and access your fixed rate bond via their easy-to-use mobile app.

Key Features:

  • Interest rate: 4.65% AER
  • Deposit Amount: £50 t0 £100,000
  • Fund access: end of the fixed term

Other benefits:

  • Flexible term choice from six months to five years.
  • You can open an account in as little as 10 minutes. 
  • You have one week from opening the account to deposit any funds.
  • You can have as many Fixed Saver Accounts as you like as long as they collectively don't exceed the maximum amount of £100,000.

4. Vanquis Fixed Rate Savings Bonds

You can apply for the Vanquis two-year Fixed Rate Savings Bonds online, over the phone or by post.

If you're looking for a single or joint account, Vanquis has you covered, allowing you to earn interest on your savings monthly or annually — whichever best suits your needs.

Key Features:

  • Interest rate: 4.60% AER
  • Deposit Amount: £1,000 to £250,000
  • Fund access: end of the fixed term

Other Benefits:

  • Earn interest paid to you monthly or annually.
  • You can choose a fixed term from six months to five years.
  • Options for single and joint accounts.
  • You can apply in multiple ways, such as online, by telephone, and via post.

How to Apply for Fixed Rate Bonds Savings Accounts

You may be eager to make the most of your savings, which is great!

To make the process smoother, we've compiled a step-by-step guide to help you. But before we share it with you, you'll need to meet some requirements and have the paperwork ready for your application.

Requirements

  • You need to be over 18 years old.
  • You need a permanent UK address you've had for over three years.
  • Proof of ID like a Passport or driver's licence.
  • Proof of address.

Once you've got all the documentation for your application, you can start applying for a two-year fixed rate bond with our five simple steps:

  1. Pick your fixed rate bond: once you've chosen the right fixed rate bond savings accounts, either from our top picks or elsewhere, make sure you read all terms and conditions before you sign an agreement.
  2. Deposit your savings: once you've applied and passed the credentials with your chosen financial institution, you pay your two-year fixed term deposit.
  3. Leave money locked away: your money will sit in the account until the fixed term ends, and you won't be able to access it until now.
  4. Interest earned: your savings will accrue during the fixed period and will be paid into the savings account or other account either monthly or at the end of the fixed period-whichever you agreed on.
  5. Spend or reinvest: once your bond has matured, you'll receive your initial investment amount plus all the profit made from interest. You can choose to spend your savings or reinvest, as some providers offer loyalty rates for reinvesting, so you can make even more money by saving.

Final Thoughts on Fixed Rate Bonds

Fixed rate bonds are ideal for earning guaranteed interest on your savings.

A fixed rate savings account allows you to confidently save, knowing that you can't spend the money and can go about your day-to-day business without worrying about anticipated profit rates or returns. All you need to do is add money to the savings account and leave it to make more money. It's that simple!

Explore all your financial options and tools with Compare Banks. On our website, you can search through all banks, building societies, financial institutions, and banks across the UK and compare them to find the most suited.

FAQs

What Interest Rates Can I Expect for 2-Year Fixed Rate Bonds in the UK?

What's the Difference Between an ISA and Fixed Rate Bond?

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Is It Better to Get a 2-Year or 5-Year Fixed Rate Bond?

Is a 2 Year Fixed Rate Bond a Good Idea?

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