What is a fixed rate cash ISA? How they work and when they’re worth it

A fixed rate cash ISA is a type of tax-free savings account where your interest rate stays the same for a set period of time.

In return for that certainty, your money is usually locked away for the length of the term.

Fixed rate cash ISAs can offer savers reassurance and predictability when planning ahead.

To understand the ISA rules and allowances read our in-depth guide. Or read on to find out more about fixed rate cash ISAs and decide if opening one is a good option for you.

What is a fixed rate cash ISA?

With a fixed rate cash ISA, you agree to leave your money in the account for a set term, like one, two or five years. During that time, the interest rate won’t change.

Like all cash ISAs, the interest you earn is tax-free, meaning it doesn’t count towards your personal savings allowance. 

How do fixed rate cash ISAs work?

When you open a fixed rate cash ISA, you’ll usually:

• Choose a fixed term (for example, one year or three years).
• Deposit your money during an initial funding period.
• Earn the same interest rate for the full term.

At the end of the term, your ISA will mature. You’ll normally be given options like withdrawing your money, reinvesting it, or moving it to another savings product.

Can you withdraw money from a fixed rate cash ISA?

Fixed rate cash ISAs are designed for savers who don’t need regular access to their money. Most of the time:

• Withdrawals aren’t allowed during the term.
• Early access can result in a loss of interest.
• These restrictions are what allow providers to offer a fixed rate for the full term. So before you choose a fixed rate cash ISA, you should be confident you won’t need the money before the term ends.

Features of fixed rate cash ISAs

Things you can benefit from:

• Certainty over the interest you’ll earn.
• Protection if interest rates fall; your fixed rate will stay fixed.
• Tax-free interest.

Things to consider:

• You’ll likely have limited or no access during the term.
• You may lose out on interest if you choose to close the account early.
• Fixed rate ISAs typically offer fewer flexibilities (like withdrawal options) when compared to variable rate ISAs.

When to consider a fixed rate cash ISA

Fixed rate cash ISAs can offer a sense of certainty and stability, especially if you’re saving for a medium-term goal. A fixed rate Cash ISA could suit you if:

• You’re saving for a known future goal.
• You don’t need access to your money in the short term.
• You value certainty and stability over flexibility.
• You want to lock in a rate rather than keep track of market changes.

Checklist before choosing a fixed rate cash ISA

Before opening a fixed rate cash ISA, it’s worth checking:

• The length of the fixed term.
• Whether withdrawals are allowed
• Whether you could lose out on interest for withdrawing or closing the account early.
• What happens when the term ends.
• That your savings are covered by FSCS protection.

Choosing the right ISA is about balancing certainty, access, and your future plans. Understanding how fixed rate cash ISAs work can help you make a confident decision.