Six and nine month fixed savings bonds: What are the interest rates and are they a good deal?

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Savers trying to decide between holding cash in an easy-access account or switching to a longer term fixed-rate deal may be able to settle on a compromise.

There are now a selection of six and nine-month fixed deals and notice accounts that could make the perfect halfway house for savers. 

These accounts offer higher returns than easy-access rates, but don’t require them to lock their cash away for years at a time – so they can switch to another deal sooner if rates continue to rise. 

Middle ground: There are now a selection of shorter term fixed deals and notice accounts that could make the perfect halfway house for savers

Roughly 80 per cent of UK savings are held in easy-access accounts, according to analysis by Paragon Bank.

Those considering fixed-term savings products will typically be weighing up locking their cash away for between one and five years.

However, shorter term fixed rate savings deals are available – typically offering a choice of either six or nine months.

Savings rates have been rising at a rapid pace in recent months. The best one-year fixed rate deal now pays 4.31 per cent. This time last month, the best one-year deal paid 3.35 per cent. 

Many will therefore be hesitant about fixing their savings for a year or more in fear of missing out on even higher rates over the coming months.

This is because, once the cash is held within a fixed rate account, savers cannot typically add or withdraw funds until the end of the fixed term period – at least without incurring a considerable penalty.

Six or nine month fixed rate accounts could make for the perfect compromise for those savers who wish to take advantage of potentially higher fixed rates in the near future. 

Equally they may appeal to those worried about surrendering access to their money for too long a period of time during a a time of rampant inflation. 

The savings platforms Raisin UK* and Hargreaves Lansdown’s Active Savings* are home to the highest short-term fixed rates on the market at present.

Hargreaves Lansdown’s best six-month deal pays 3.02 per cent, whilst its best nine-month deal pays 3.5 per cent.

Raisin UK’s platform is offering a nine-month deal paying 3.6 per cent* and a six month deal paying 2.61 per cent.*

Saver deposits are protected up to £85,000 per individual under the FSCS via all the providers on both platforms.

 Upward trend: Interest rates are expecting to continue rising over the coming months

Raisin is also offering £30 exclusively to This is Money readers who sign up via either of the links above and deposit £10,000 into either account.

This means that a £10,000 deposit in Raisin’s nine-month 3.6 per cent deal could effectively secure an even higher return with the bonus included. 

After nine months £10,000 would have earned a total of £269 – with the bonus included it would be £299. 

Although these rates are lower than the longer term-fixed deals, they are clearly higher than the best easy-access accounts.

The best easy-access accounts are currently paying up to 2 per cent. Outlier Al Rayan Bank pays 2.35 per cent, whilst Yorkshire Building Society pays 2.5 per cent on balances up to £5,000.

Those saving £10,000 in Al Rayan’s bank best-buy deal will earn £177 in interest after nine months. That’s £92 less interest than Raisin’s best nine month fix, or £122 less interest when including the £30 bonus.

The best one-year and two-year fixed rate deals on the market currently pay 4.31 per cent and 4.61 per cent, and are offered by Charter Savings Bank.

In terms of a longer term deal, Nationwide has also just launched a 4.75 per cent three-year deal.

Whilst it may seem like a sensible strategy to fix for a shorter term based on the belief that rates will rise further, it is important that savers understand that it is a gamble nonetheless.

Anna Bowes co-founder of Savings Champion says: ‘Shorter term fixed rate bonds are very popular at the moment.

‘For those who are not quite prepared to lock up their cash for a year, there are some competitive shorter term bonds that might fill the gap. 

‘That said, at the moment these are quite a bit lower in rate and, of course, no-one can predict when rates will peak and start to fall again – or at the very least stop rising. 

‘So you could find that in six or nine months, longer term bonds are no higher than they are today and you have earned less interest in the meantime.’ 

What are the rates on notice accounts? 

Another alternative for savers is a notice account. These deals enable savers to withdraw their funds following a notice period, typically ranging between 30 and 120 days, but can offer savers a better return than they might otherwise achieve with an easy-access account.

The average notice account pays 1.64 per cent, according to Moneyfacts compared to the average easy-access deal which pays 0.98 per cent.

The best paying notice accounts pay more than the best easy-access deals. For example, the best 95 day notice deal is offered by Charter Savings bank and pays 2.7 per cent on balances between £5,000 and £1m.

Raisin UK* and Hargreaves Lansdown’s Active savings* also offer a variety of notice accounts that could enable savers to leapfrog the best easy-access deals.

This post first appeared on Dailymail.co.uk