Did you know that you can earn four times more interest by locking it away in a
fixed rate bond?
According to recent research, the average bond pays a rate of 2.87%. By contrast, savers with
instant access accounts are earning just 0.65% on average.
And what about the top paying accounts in each section? Well, the best instant access deal is available at Abbey and offers a rate of 2.5%, while there are a number of fixed rate bonds with a 4.30% rate.
The reason why there is such a vast gap between the two types of savings accounts is down to the fact that banks are not only desperate to get hold of your cash, but to ensure you don't touch it for a long time.
Problems with long term saving
Up until now, the main downside of
fixed rate accounts was that you needed to lock your money away for up to five years to get the best rates (read more about the perils of long term savings
here).
But now its possible to get a top rate of 4.3% over a period of just one year at
West Bromwich.
The only downside is you have to invest a minimum of £5,000, so it may not be for everyone.
Fixed rate not always better
If you are looking for a savings account, it's important to remember to choose one that suits your needs.
Fixed rate accounts may have better rates, but they come with heavy penalties for withdrawals, meaning the rate you get will plummet dramatically if something unexpected happens and you need to access your funds.
That's why we say it is generally best to keep the majority of your savings in a top-paying fixed account, while keeping a small amount of savings in an
access account in case of emergencies.
