Fixed Rate
What is a fixed rate?
A fixed rate is an interest rate (the percentage a bank pays you for keeping savings with them) that stays the same for a set period. Usually 1 to 5 years. No matter what happens to interest rates elsewhere, yours is locked in.
Where do you find fixed rates?
Fixed rate savings accounts and fixed rate Cash ISAs both offer them. You agree to leave your money untouched for the term, and the bank guarantees the rate.
What’s the trade-off?
You can’t usually withdraw your money early without losing some or all of the interest. And if rates rise while your money is locked away, you miss out on the higher rates.
But if rates fall, you’ll be earning more than people opening new accounts.
Fixed rate vs variable rate
A variable rate can change at any time. Up or down. You get flexibility but no certainty.
A fixed rate gives you certainty but no flexibility. You know exactly what you’ll earn, but you can’t touch the money.
Key points about fixed rates
- Rate is guaranteed. Won’t change during the term
- Money is usually locked away. Early withdrawal costs you interest
- Good when rates might fall. Locks in today’s rate
- Trade-off: certainty vs flexibility
More information
Scrimpr links to official sources so you can verify what you’ve learned.