What is a fixed rate ISA?
A fixed rate ISA locks in your interest at a set rate for a chosen term, providing certainty for savers seeking stability in the current economic climate. This type of cash ISA allows tax-free savings up to the annual £20,000 allowance for the 2025/26 UK tax year, as confirmed by Money.co.uk. Unlike variable rate options, fixed ISAs guarantee your return regardless of market fluctuations, making them ideal for risk-averse UK savers planning ahead.
Benefits of fixed rates
Fixed rates offer predictable earnings, protecting against base rate cuts that could lower returns elsewhere. For instance, with the average one-year fixed ISA rate at 3.89% AER in early October 2025, according to Moneyfactscompare, you can secure reliable growth on your savings.
How it differs from variable rate ISAs
Variable rate ISAs can change with market conditions, offering flexibility but potential drops in interest, while fixed versions prioritise security over access. To explore broader options, see our guide on the best isa rates.
Eligibility and rules
You must be a UK resident aged 18 or over to open a fixed rate ISA, with interest calculated daily but paid at maturity or annually.
Current best 1-year fixed ISA rates
The top 1-year fixed ISA rate stands at 4.27% AER from Tembo via Investec, outperforming the market average and ideal for short-term savers. These deals often require a minimum deposit of £1, but always check penalties for early access, which can reach 120 days’ interest.
| Provider | AER (%) | Min Deposit | Penalty |
|---|---|---|---|
| Tembo via Investec | 4.27 | £1 | 90 days’ interest |
| NatWest | 4.20 | £500 | 120 days’ interest |
| Moneyfactscompare highlights | Up to 4.2 | Varies | Standard fixed terms |
On a £20,000 deposit at 4.27% AER, you’d earn around £854 tax-free over one year. For more on these, visit MoneySavingExpert’s best cash ISAs guide.
Pros include rate security; cons involve limited access until term end.
Best 2-year and longer-term fixed ISAs
For medium-term commitments, the best 2-year fixed ISA rates hover around 4.00% AER, with Santander offering competitive annual interest payments based on deposits by November 2025. Longer terms like 3-5 years yield averages of 3.84% AER for over 550 days, per Moneyfactscompare’s weekly roundup, suiting savers confident in locking away funds.
- Santander 2-year: Up to 4.00% AER, min £500, 120-day penalty.
- Best 3-year options: Around 3.90% AER from select building societies.
- 5-year top rates: 3.80% AER for long-term planning, with minimal deposits.
Choose longer terms if you anticipate falling rates; for projections, check our best isa rates 2025 article.
Best fixed ISAs for over 60s
Seniors can access the same fixed rate ISAs as others, but some providers offer enhanced deals for over-60s, such as boosted AERs up to 4.10% for 1-year terms. These accounts provide tax-free income vital for retirees, with no age-specific restrictions beyond standard eligibility. Yorkshire Building Society maintains stable fixed rates unaffected by recent base rate drops, making it a solid choice.
| Provider | Term | AER for Over 60s (%) | Min Deposit |
|---|---|---|---|
| Specialist senior deals | 1 year | Up to 4.10 | £1,000 |
| Yorkshire BS | 2 years | 3.95 | £100 |
Tax considerations favour ISAs over pensions for flexible withdrawals.
How to choose and open a fixed rate ISA
Prioritise AER, term length matching your goals, and low penalties when selecting the best fixed ISA rates. Compare via independent sites like Money.co.uk for transfer options that don’t count against your allowance.
- Verify eligibility online.
- Transfer existing ISAs tax-free.
- Deposit within windows; act on best isa fixed rates today.
Avoid pitfalls like overlooking fees—early withdrawal could cost 150 days’ interest.
For full comparisons, see NatWest’s fixed rate cash ISA details or Santander’s 2-year option.
Fixed ISA rates outlook for late 2025
With base rates potentially falling further, fixed ISA rates may dip below 4% by year-end, but locking in now secures higher yields. Martin Lewis recommends fixed bonds for stability amid uncertainty, as noted in MoneySavingExpert updates. Trends show slight average rises in longer terms, per Moneyfactscompare.
Frequently asked questions
What is a fixed rate ISA?
A fixed rate ISA is a tax-free savings account where the interest rate is guaranteed for a set period, such as one or two years, shielding you from rate changes. This contrasts with easy-access ISAs, offering peace of mind for conservative savers in the UK. It’s part of the broader cash ISA family, allowing up to £20,000 annual contributions without tax on earnings.
How do fixed ISAs compare to variable rate ISAs?
Fixed ISAs provide locked-in returns, ideal when rates are high, while variable ones allow more flexibility but risk lower payouts if the Bank of England cuts base rates. For short-term needs, variable might suit better due to access, but fixed excels for predictable growth over 1-5 years. Expert savers often blend both to balance security and liquidity.
What is the best 1-year fixed ISA rate?
Currently, the best 1-year fixed ISA rate is 4.27% AER from providers like Tembo via Investec, surpassing the 3.89% average as of October 2025. This rate applies to cash ISAs with standard terms, but verify for bonuses or minimums. For strategies, compare against inflation to ensure real returns, potentially earning £854 on £20,000 tax-free.
Are there fixed ISAs for over 60s?
Yes, fixed ISAs are available to those over 60 without special restrictions, though some banks offer senior-boosted rates up to 4.10% AER for added retirement income. These accounts help manage tax efficiently alongside pensions, with no withdrawal age limits but penalties for early access. Retirees should assess liquidity needs, as longer terms lock funds but beat variable options in falling rate environments.
How much can I put in a fixed ISA?
The maximum for a fixed ISA is £20,000 per tax year (6 April to 5 April), combinable with other ISA types but not exceeding the total allowance. Transfers from previous ISAs don’t count towards this limit, preserving tax-free status. Beginners should start small to test providers, while experts maximise via multiple accounts for diversified fixed terms.
What happens if I withdraw from a fixed ISA early?
Early withdrawal from a fixed ISA typically incurs a penalty, often 90-150 days’ equivalent interest, reducing your earnings significantly. For example, closing a 1-year deal midway might cost £300 on a £20,000 balance at 4% AER. Advanced users plan around this by choosing shorter terms or laddering maturities to avoid losses in emergencies.
What are the best fixed ISA rates for 2 years?
The best 2-year fixed ISA rates reach around 4.00% AER, with providers like Santander leading for medium-term security. These outperform shorter terms slightly due to commitment, yielding about £800 on £20,000 over two years tax-free. Consider market trends; if rates fall, locking in now via transfers maximises returns without using your allowance.
