Best 18 Month Fixed Rate Bonds

What is an 18-month fixed rate bond?

An 18-month bond is a type of fixed savings account that locks your money away for 18 months and offers a guaranteed rate of interest in return. By locking in for 18 months you could have the ideal combination – an account that pays a guaranteed rate, without losing access to your savings for too long.

It could be perfect for those who have a specific goal in mind with a set timeframe (such as an upcoming wedding or house move), or who want the security of knowing that their rate can’t fall for 18 months.

How does an 18-month fixed rate bond work?

When you open an 18-month fixed rate bond, you’ll be expected to deposit a lump sum in the account. The provider will usually specify the minimum opening deposit required and, depending on the individual terms, you may be able to add to your account for a limited period.

The interest rate on an 18-month bond is fixed, which means it won’t change for the duration of the term and the return on your money is guaranteed. Different accounts will pay interest at different times – you may be able to choose to have the interest paid on the anniversary of when you opened the account, on maturity or monthly, for example.

Note that, as with the majority of fixed bonds, most 18-month bonds won’t allow you to withdraw your money before the end of the term. This means you need to be confident that you can keep the money locked away for the full 18-month period,. At the end of the term your account matures and the money will be returned to you, normally by being paid into a linked or nominated account. Your provider should write to you ahead of time to let you know your options.

How to open an 18-month bond

The first step is to compare the best 18-month bond rates and find the account that suits your needs.

Make sure to pay particular attention to opening methods and any additional opening criteria – some accounts specify that you can only open the account in person or by post, while others expect you to download a mobile app, for example. Similarly, you may need to have a current connection with the provider, such as already being a customer or being a member of the particular credit union. You can check for this type of criteria by clicking on “product specification” in the chart above.

Once you’ve found an account that works, you’re free to open it using one of the methods offered. No matter which method you choose you’ll be expected to fill in an application form, and will need to provide documents such as proof of ID and address. You may also be expected to link a current account to the bond for transactional purposes, but this will all be explained to you by your individual provider.

Then you simply need to make the opening deposit required. Note that the minimum will typically be higher than for easy access accounts, often at least £1,000, so make sure that this fits within your budget.

How to choose an 18-month bond

Here are a few things to bear in mind if you’re considering an 18-month bond:

Rate

The rate is arguably the most important one, as the higher the rate, the more interest you’ll be earning on your deposit and the quicker your savings can mount up. But there are other things to consider too – sometimes the highest rate available may not have opening criteria or deposit requirements that suit your needs, for example, so it’s important to look beyond rate alone.

Opening and operating method

This can be a surprisingly important consideration – let’s say you’re not particularly tech savvy but the best 18-month bond expects you to open and operate the account via mobile app. If you’re not comfortable with that, you’ll need to look at other options.

Deposit requirements

If you’ve only got £2,000 to lock away but the minimum deposit requirement for your ideal account is £10,000, you won’t be able to open it. Note that you can tailor the chart results above by specifying the amount you want to save, showing you only the accounts that will meet your requirements.

Additions and access

You may like the ability to add to your pot for a set period, or perhaps you’d prefer the flexibility of being able to access your money in an emergency. If these types of considerations are important to you, make sure to check the product specifications to find an account to suit (though remember that early access is rarely possible with this type of bond).

Is an 18-month fixed rate bond safe?

Your money should be as safe in an 18-month fixed rate bond as in any other type of savings account.

All savings providers need to be regulated by the Financial Conduct Authority (FCA) and the money you deposit is protected by the Financial Services Compensation Scheme (FSCS).

The FSCS will compensate you for any money you lose if a savings provider fails, up to a maximum of £120,000 per provider. Make sure you check which providers share a banking licence as the maximum limit applies to your total deposits under each licence, not each individual provider.

Is an 18-month fixed rate bond right for me?

An 18-month fixed rate bond may be worth considering if you're comfortable locking away your money for more than one year but don’t want to commit to two years or longer.

These bonds allow you to secure a guaranteed rate of interest for 18 months, which can be appealing if you know you won’t need to use the money for this length of time. They can be ideal if you’ve got something specific to save towards, such as a wedding, house deposit or home improvements, or a once-in-a-lifetime trip.

However, if you think there’s a chance that you’ll need to access your savings in the next year and a half, or if you’d like to add to your savings pot more regularly, this type of fixed rate bond may not be the right option for you.

Alternatives to fixed rate bonds

If a fixed bond isn’t right for you, there are other types of savings accounts that may be more suitable for your situation, including:

• Easy access accounts: These are ideal if you want to be able to add to and withdraw from your savings when you choose (although look out for any restrictions that individual providers may apply).
• Notice accounts: A kind of halfway house between fixed bonds and easy access accounts, these allow you to withdraw from your savings but only after giving a set amount of notice.
• Regular savings accounts: If you want to deposit into savings every month, instead of depositing a lump sum immediately, a regular savings account is likely to be more suitable than a fixed bond.
• Individual savings accounts (ISAs): If you’re concerned about breaching your Personal Savings Allowance (PSA) and paying tax on the interest you earn on your savings, an ISA may be worth considering. ISAs allow you to deposit up to £20,000 per year and any interest you earn is exempt from tax.