Within savings, a fixed rate refers to the interest rate that remains unchanged for a specific period of time.
This allows savers to know exactly how much interest they will earn over the fixed rate period. Usually fixed rate savings accounts will have withdrawal restrictions.
Fixed Rate Example:
You decide to explore fixed-rate savings accounts offered by various banks and financial providers across the UK. After some research, you choose to open a fixed-rate savings account with a financial institution that offers an attractive interest rate of 4.9% per annum.
Here's how it works: You deposit a sum of money into this account, and for the entire duration of the fixed-rate period, which is typically 12 months or longer, your savings will accrue interest at a fixed rate of 4.9% per year.
This means that your interest earnings won't be subject to fluctuations in the market during this period. It provides a predictable and steady growth for your savings, making it easier for you to plan and achieve your financial goals.