Savers traditionally take out fixed-rate bonds to secure a guaranteed interest rate on their nest eggs for anything from one to five years.
But a growing number of short-term bonds are enticing savers into fixing for just a few weeks or months.
There are currently 44 fixed-rate bonds that last for six months or less – up by a quarter in just a year, according to James Hyde of rate scrutineer Moneyfactscompare.
Some last for just 30 days. So, are they a good option for your cash?
Short-term: There are currently 44 fixed-rate bonds that last for six months or less — up by a quarter in just a year, some last for just 30 days
Why would you want one?
Most short-term bonds are available only on savings platforms, which are websites where you can hold a number of savings accounts in one place.
The platforms sort out all of the admin involved, so you have only one set of log-in details and minimal paperwork.
That makes it easier to switch between savings accounts on a more regular basis and makes the idea of short-term bonds more palatable.
Rates on short-term bonds are pretty competitive. Among the best is a three-month fixed-rate bond from SmartSave via savings platform Flagstone, which has an interest rate of 5.17 per cent.
Putting £10,000 into this account would earn £129.24 in interest by the end of the term.
Bank ABC has a three-month fix at 5.16 per cent via Flagstone, followed by GB Bank at 4.99 per cent for a three-month deal through savings platform Raisin.
For savers who want to lock money away for just 30 days the top rate is 4.85 per cent with Emirates NBD via Hargreaves Lansdown, followed by GB Bank at 4.66 per cent and Sainsbury’s Bank at 4.42 per cent, both through Flagstone.
Mr Hyde says: ‘These options can be appropriate for people who are saving for something in the short term.’
Is easy-access the best option?
The best easy-access accounts (at least 18 of them offer 5 per cent or more) pay similar rates to short-term bonds — so why lock yourself into a bond?
Firstly, the rate on an easy-access account can fall at any time, whereas with a fixed-rate bond you’re locked into a rate. ‘Bonds may appeal to savers looking for a greater degree of certainty,’ says Mr Hyde.
Secondly, fixed-rate bonds tend to pay interest monthly, whereas several easy-access accounts pay yearly. If you want a monthly income, the former may be a good option.
The best-paying easy-access option is the Double Access Savings Account from Paragon Bank, sits at 5.25 per cent.
However, it permits only two withdrawals every 12 months and interest is paid annually.
If a third withdrawal is made, the rate plummets to 1.5 per cent. The top-paying easy-access account which pays interest monthly is from Secure Trust Bank at 5.10 per cent.
‘If you want to be able to access your money in the coming months, consider easy-access accounts,’ says Andrew Hagger, of personal finance website Money Comms.
…or a longer-term bond?
If you can afford to lock your money away, now might be a good time to open a longer-term fixed-rate bond, as rates are unlikely to become more generous. Economists forecast that interest rates have peaked and could be cut next year.
The top rate for a one-year deal is 6.03 per cent from Shariah-compliant bank Habib Bank Zurich.
