Best 3 Year Fixed Rate Cash ISAs

What is a three-year fixed rate ISA?

A three-year fixed rate ISA is a type of savings account that offers an interest rate guaranteed to remain the same for three years. What’s more, any returns on your money are automatically tax-free (as with all Individual Savings Accounts).

How do three-year fixed rate ISAs work?

Three-year fixed rate ISAs ask you to lock away a lump sum in exchange for receiving an interest rate that won’t change. By opening one of these accounts, you agree to having no access to your money throughout the term. As a result, you may face a loss of interest penalty and, in some cases, account closure if you later decide to withdraw funds.

Yet, for many savers, the restrictions can be worth it. In contrast to variable rate ISAs, a three-year fixed ISA offers secure, predictable returns that won’t be impacted by fluctuations in the wider savings market. And, unlike three-year fixed bonds, there’s no chance you’ll be taxed on any interest earned.

Discover the best 3 year fixed ISA rates using our chart above.

Benefits of three-year fixed rate ISAs

Stability and security

The main advantage of these accounts is that you get an interest rate guaranteed to remain the same over the course of the three-year term. This makes it easy to get an idea of how much you could earn by the time the account matures, and you won’t need to worry about rate fluctuations in the wider savings market.

Risk-free investment

Three-year fixed rate ISAs are a type of savings account – not an investment – which means your capital isn’t at risk.

Tax-free earnings

Any interest earned from a three-year fixed ISA is automatically exempt from tax, which could see your money grow quicker if you’d normally be at risk of exceeding your Personal Savings Allowance and paying tax on your savings. Learn more about how your savings are taxed.

Suitable for medium-term savings goals

A three-year ISA could be a good option if you have a medium-term savings goal (for example, if you’re looking to buy your first home in a few years’ time). They are a middle ground between shorter-term ISAs (which have historically paid lower rates) and five-year ISAs (which might be too much of a commitment for some savers).

Drawbacks of three-year fixed rate ISAs

Limited access to funds

Even the very top 3 year fixed rate ISAs restrict access to your money throughout the term. While some grant early access, this is usually subject to a loss of interest penalty and/or account closure; others prohibit withdrawals entirely.

Furthermore, most three-year ISAs don’t allow you to make regular additions to your savings pot. Although some might allow contributions for a short window from opening, other accounts don’t accept any further deposits at all.

Instead, you might want to consider a variable rate ISA or regular savings ISA if you’re looking to save little and often.

Inflation risk

Your money could lose purchasing power in a three-year fixed rate cash ISA if inflation were to accelerate above the rate you locked in. This occurs when the cost of goods and services are rising at a faster rate than your savings are earning interest. Read our guide for more information on inflation and how it can impact your finances.

Interest rates might be lower than other investments

While the best 3-year ISAs can offer competitive interest rates, you might be able to find higher returns elsewhere.

Historically, five-year fixed ISAs have outperformed their shorter-term counterparts, as they paid higher interest rates to compensate savers at risk of their money losing value to inflation over a longer period of time.

However, in recent years, short-term ISAs have typically offered more than their longer-term counterparts due to widespread economic uncertainty (although this margin has narrowed, so it’s wise to regularly check the best rates).

Alternatively, those with a bigger risk appetite may find stocks and shares ISAs offer potential for greater returns in the long-term (typically five years or more). But, remember that past performance is never an indication of future returns and your capital is at risk (meaning you could get back less than you invested).

How do you open a three-year fixed rate ISA?

UK citizens aged 18 and over (as well as crown servants, members of the Armed Forces, overseas diplomats, civil servants and their spouses/civil partners) can apply for a three-year fixed rate ISA.

These accounts can be opened online, in branch, by post, over the phone or by mobile app depending on the specific product and provider. Find out how a particular three-year fixed ISA can be opened and managed by consulting our chart above.

Most three-year fixed ISAs require a minimum opening deposit ranging anywhere from £1 to £10,000 or more. While some allow you to add to this amount for a short window from opening, others prohibit further contributions. This information can be found by selecting ‘view further details’ next to a listing on our chart.

Tips for choosing the best three-year fixed rate ISA

With many accounts to choose from, read below for some tips that could help you find the best 3 year cash ISA for your needs and circumstances:

Compare interest rates

The amount of interest you could earn is usually one of the most significant factors when choosing a three-year fixed ISA - so comparing the best rates regularly can be key.

The Annual Equivalent Rate (AER) shows how much interest you’d earn over the course of a year after accounting for any charges, bonuses and the effect of compounding. Discover the best 3 year ISA rates by clicking on ‘Sort’ at the top of our chart and selecting ‘Rate’.

Is there a minimum deposit required to open a three-year fixed rate ISA?

Most three-year fixed ISAs require a minimum opening deposit, which can range anywhere from as little as £1 to £10,000 or more. Discover the minimum deposit needed to open an account by selecting ‘view further details’ next to a listing on our chart above.

Understand withdrawal restrictions

Very few – if any – three-year fixed ISAs allow penalty-free withdrawals before the account matures; most will impose a loss of interest penalty if you want to access your cash early which, in some cases, means you’ll end up with less money than you put in.

Some will also require you to have a linked account where funds will be withdrawn to and may stipulate that your fixed ISA must be closed to gain early access.

If it’s likely you’ll need to access your funds during the three-year term, it might be worth looking for an account that comes with the least amount of withdrawal restrictions or considering a variable rate ISA.

Look at how often interest is paid out

Three-year fixed ISAs typically pay interest yearly (or on anniversary), however, it’s possible to find accounts that offer returns monthly or on maturity as well.

Earning interest monthly can be particularly beneficial if you want to receive a regular income from your savings pot - provided the interest can be paid into another account. But, keep in mind that this means you won’t be able to take advantage of the effects of compound interest, and not all accounts allow interest to be paid away.

Look at the provider's reputation

The reputation of the provider will also likely factor into your decision – details of which can be found by looking at the banking satisfaction survey results from the Competition and Markets Authority (CMA).

It might also be worth reading reviews from current and previous customers and, of course, seeing who has won our coveted Moneyfactscompare.co.uk Awards.

It’s important not to rule out less-familiar names entirely, as challenger banks often offer some of the most competitive rates on the market and are subject to the same protection afforded to the UK’s biggest banks.

How much can you save in a three-year fixed ISA?

The most you can deposit into a three-year fixed ISA is £20,000 - as per the yearly ISA allowance. But, bear in mind this amount is shared by any ISA you pay into within a single tax year.

How do three-year fixed ISAs pay interest?

When you put money in a three-year fixed rate cash ISA, you receive a guaranteed rate of interest for three years which is typically paid either monthly, yearly, on maturity or on anniversary. As the rate won’t change over the duration of the term, your savings will be protected if rates fall across the market. However, keep in mind you could be left out of pocket if interest rates rise or inflation accelerates above the rate you locked in.

Some three-year fixed ISAs pay interest away into a separate linked account, while others add it to your balance - allowing the interest to be compounded. Find out more about compound interest and how it can boost your savings balance.

While any interest earned from a three-year fixed ISA is exempt from tax, remember that tax benefits of ISAs depend on your personal circumstances and may change in the future.

Can I withdraw money from my three-year fixed rate ISA before the term ends?

All ISAs must allow some form of access to your cash, although this is normally subject to a loss of interest penalty. In the case of a three-year fixed ISA, you usually won’t be able to make a withdrawal or transfer out funds before the three-year term ends without facing a penalty.

After three years, your provider should be in contact with more information on what will happen to your account. Unless you choose a different option, many providers will simply move your money into a standard variable ISA.

What happens to my ISA once the three-year term ends?

Once the three-year term ends, you’ll be able to access any money held in your ISA without penalty. However, your provider should be in touch before then to explain the options for what can happen when your ISA matures.

Often, you’ll be able to reinvest your cash with your existing provider – either in another fixed account or a variable account. Alternatively, you might choose to withdraw your cash and close the account or place it in an account with another provider.

If you don’t hear from your provider (or do nothing), any money held in your three-year fixed ISA will usually be transferred to an easy access ISA. But, bear in mind that some providers might automatically reinvest your cash into another of their fixed products, so it’s important to review your options in plenty of time to make sure you’re not tied in.

How do three-year fixed rate ISAs compare to shorter-term ISAs?

Short-term ISAs can be a good option if you have short-term savings goals of one to two-years, or even if you only wish to lock away your money for a few months. As a result, it’s worth weighing up if a short-term ISA may be more suitable for your needs compared to a three-year fixed ISA.

Greater flexibility

A short-term ISA can often be more flexible compared to even the best 3 year cash ISA, as there’s the chance to review your account sooner. However, you’ll still be locked in for the chosen period, with additions rarely allowed and withdrawals typically on payment of a penalty.

Interest rates

In the current market, interest rates are often higher on one- and two-year cash ISAs than they are on longer-term options, though this isn’t always the case, and the line between three- and two-year ISAs in particular has been blurring in terms of top returns.

Also, because you’re locking your money away for a shorter period, you’d notice the impact of any rate change much sooner. This can be either positive or negative, depending on which way interest rates go over the term.

Impact of interest rate fluctuations on three-year fixed rate ISAs

Interest rates can change a lot over three years, and because you’re locked in for that time, you wouldn’t be able to benefit from any potential rate increases. This means you have the potential to lose out on valuable returns, so it’s important to be comfortable with the term from the outset.

Yet conversely, if interest rates were to fall over the period, you’d end up being far better off, as you’d still be securing the higher rate for longer. It’s all a balancing act and a matter of weighing up the options, and is why keeping an eye on the market – ideally through our chart – can make all the difference.

Should I consider fixing for a longer or shorter term?

It’s up to you whether you fix for three years or if you choose a shorter- or longer-term option.

You may want to fix for a shorter-term if you don’t want to lock away access to your money for as long as three years. Also, one-year ISAs and two-year ISAs may pay a higher rate than three-year ISAs which could make them a more attractive option.

However, if you’re concerned that interest rates may fall and you can afford to lock your money away for longer, a four- or five-year ISA may be worth considering as these accounts will pay a guaranteed rate of interest for a longer period.

But it’s worth bearing in mind that, if interest rates rise, you won’t be able to benefit from the higher rates if your money is put away in a long-term fixed ISA (unless you decide the penalty charge is worth incurring to withdraw your money early).

What would the estimated balance be after 36 months based on a £1,000 deposit?

Let’s say you wanted to deposit a lump sum of £1,000 into a three-year fixed ISA. If you secured an interest rate of 4.00% AER in an account that compounds interest yearly, you’d end up with £1,124.86 at the end of the term. This equates to your principal amount (of £1,000), plus £124.86 in interest. Use our lump sum savings calculator to run through other options.

What you need to know about opening an ISA

Ready to take the next step? Here’s everything you need to know about opening and managing a cash ISA.

How do I open and manage my account?

Once you’ve compared the options and found your ideal account, the first thing to do is check the eligibility requirements. This includes both standard ISA requirements – such as you’ll need to be 18 or over and a UK resident – and the requirements unique to your chosen ISA. These can include minimum deposits, transfer rules and other opening criteria, such as the requirement for a linked account or mobile app.

If you meet the criteria, the next step is to apply for the account. You’ll see that several accounts on our chart come with links that will take you directly to the provider’s application page, helping streamline the process. Many other accounts will let you apply online too, though a few will ask you to apply via other means (such as in branch or by phone), often building societies that have accounts specifically for their members.

Either way, opening an ISA should be straightforward, though be aware you’ll need to provide both your National Insurance number as well as proof of address; you may also need to supply additional identification or details of current bank accounts as well so make sure to check before applying. There’ll be an application form to fill in, and if you’re looking to transfer an ISA, you’ll need to provide details of the other account as well. Then you’ll simply need to provide the funds to open your new account, and from there can manage it via any method permitted (typically online or by mobile app, as well as by post, in branch or by phone if applicable).

How many days do I have to put money in?

This varies depending on which account you choose. Some expect the full amount to be deposited straight away, while others will allow further additions for a limited period. This is typically for around 14 days, but in some cases will be allowed until a specific date.

Can someone else pay into my account?

Not directly. ISA contributions must come from your own bank account, though someone can gift you the money to pay into it, provided the amount is within your own ISA allowance and the account permits further additions.

How is interest calculated?

Interest is calculated at the agreed-upon interest rate – the AER – which is essentially a percentage of the amount held in the ISA. Many providers calculate interest daily, but will typically only pay it on a monthly or annual basis, depending on the terms of your account. Note that having interest paid monthly can offer the potential to gain more in the long-run, as the interest will be reinvested and compounded 12 times per year.  

Can I transfer an existing cash ISA?

This will depend on the terms of the account, as while many permit transfers of existing ISAs, not all do. It’s important to check the terms and conditions of your preferred account, and read our guide on how to transfer an ISA to find out more.

When to find the best 3 year fixed ISA rates 

Banks and building societies consider many factors when setting their pricing, so it’s difficult to know when the best time is to find the highest three-year fixed ISA rates.

That being said, there’s usually an uplift in competition in the weeks leading up to the end of the tax-year on 5 April. This can be a popular time for providers launching new products or increasing rates as they look to entice customers wanting to use up the last of their ISA allowance before it automatically resets once the new tax-year begins.

Savers may also find returns rising following a hike to the Bank of England base rate. The Monetary Policy Committee (MPC) meets eight times a year to decide whether to raise or lower the UK’s central interest rate, so keeping up to date with the latest announcements could help forecast any changes to returns. However, it’s worth mentioning that the base rate tends to be more connected to variable savings, though the effects can eventually influence the fixed market later on.

Regardless, it’s crucial to remember that competitive rates and their timings are never guaranteed; instead, it’s good practice to regularly review top returns and consider switching if better deals are available. You can find the best 3 year ISA rates using our chart above.

Alternatives to three-year ISAs

As discussed above, you could consider opening a fixed ISA with a shorter or longer term, depending on your preferences.

Alternatively, if you want the option to add to or withdraw from your savings, you could consider an easy access ISA or a notice ISA.

You may also choose to put your money into a standard savings account, instead of an ISA, if you’re not at risk of breaching your Personal Savings Allowance (PSA). Savings accounts typically pay a higher rate of interest than ISAs, but bear in mind that you need to pay tax on your interest if you earn more than your PSA.

Are there special deals on three-year fixed rate ISAs for first-time savers or young savers?

There aren’t any special deals on three-year fixed rate ISAs for first-time or young savers. In fact, due to the age restrictions on adult ISAs, it’s not possible for those under the age of 18 to open most three-year fixed ISAs.

Instead, children and teens below 18 years of age could consider a Junior ISA (JISA) to capitalise on tax-free returns. However, it’s important to note choice in this sector is limited and the majority of accounts offer a variable rate.