Can I exit my fixed savings deal early to get a better rate, and what are the fees?

I deposited £25,000 in February on a two-year fixed savings bond with an interest of 1.65 percent.

At the time, that was the best two-year deal on the market, so I thought I was making a smart move.

I never thought interest rates would rise as much as they have since. The best two-year fixed deal now pays almost three times as much interest as I currently earn.

I’m afraid I’m missing a golden moment for savings rates and fear that by the time my two-year deal expires in February 2024, interest rates will have fallen again and I’ll feel a fool for using a fixed-rate bond when I did.

Is there a way I can end my current fixed income deal early?

Ed Magnus of This is Money replies: Anyone trying to time the savings market has had a lot of work this year.

Over the past 12 months, rates have continued to rise, and now there are a number of long-term firm deals that pay 5 percent or more.

However, the best one-year rates are not far behind. The best one-year deal pays 4.5 percent, while the best two-year fix pays 4.8 percent — both courtesy of Gatehouse Bank.

Even the best low-threshold savings rates pay way more than what you’re currently getting. The best easily accessible deal is again offered by Gatehouse Bank which pays 2.8 percent.

You can view the latest savings rates using our independent best buy tables.

By putting £25k into a two-year fixed-rate savings contract that pays 1.65 percent, you’ll earn £831 in interest over the two-year period.

However, someone who puts £25k into the best two-year deal today would make £2,457 in two years.

It’s easy to look at rates now and fool yourself for not waiting. That said, it’s important to remember that there are many savers who have done even worse by not taking action.

There is still a staggering £267 billion stashed in current accounts earning no interest at all.

Another £461 billion is in easily accessible deals that pay less than 0.5 percent, analysis by Paragon Bank revealed last month.

Unfortunately, there’s no easy escape from a fixed-rate savings deal, as no withdrawals are typically allowed before maturity.

Many providers only state that revocation is not possible, while some make it clear that access will only be granted in exceptional circumstances.

Gatehouse Bank, for example, states that it is not possible to withdraw money early unless an account holder dies, becomes mentally incapacitated or goes bankrupt, or in other exceptional circumstances that Gatehouse Bank has agreed to “at its sole discretion”.

Aldermore Bank states: ‘In exceptional circumstances we may allow early withdrawals or closure of the account before the due date, but this is in our sole discretion, subject to proof that we will request, and we are under no obligation to do so. If we give permission, we may deduct 90 days’ interest as a condition.’

Meanwhile, Atom Bank states, “Once you have deposited money into your account, you cannot withdraw it until the end of your product term.

The only exception is in cases of financial hardship, which will be assessed on a case-by-case basis and may result in us allowing you to withdraw some or all of the funds from your account before maturity .’

We spoke to an expert from the savings website the savings guru to find out if there is room to end a fixed income deal early.

Is it possible to terminate a fixed-term contract early?

The savings guru replies: There is no right for savers to access their money once they have signed up for a fixed-rate savings account, nor are banks required to provide a cooling-off period for them – although a few do.

Savers should therefore only put money in a fixed account to which they certainly do not have access during the term.

Contrary to popular belief, however, banks are not all bad. In exceptional circumstances, banks will sympathetically listen to your case and decide at their discretion where to do so.

They have policies about what is and is not acceptable. For example, if you’ve decided halfway through the term that you want to buy a home now and want to use that fixed-term savings account to pay the down payment, that’s not enough.

However, if you are dying of cancer and need the money for treatment, that will almost certainly be viewed favorably by providers.

Likewise, a saver who has now been laid off and is going to lose his house because he can’t pay the mortgage or rent is a situation that I expect banks to back him up.

Banks must record every request and demonstrate that they are consistent in their approach and that they are not giving depositors access to funds for any reason – and the FCA may request this data to verify this.

Ed Magnus adds: Obviously, you cannot terminate your fixed-rate savings contract early unless you have serious reasons to do so, such as a serious illness or serious financial problems.

Leaving early to simply grab a better deal now that interest rates have risen, your existing savings provider won’t be willing to accept. So it means you have to wait your existing deal until February 2024.

In the meantime, try not to worry about what will happen to interest rates and try not to fool yourself for committing too early. At least you acted.

Many still have their savings in accounts earning much less than 1.65 percent, and those who have so far deferred to fixate have missed out on months of interest — albeit at lower rates.

What about fixed rate Isa deals?

The savings guru replies: Cash Isa’s are different – there is a legal right for savers to access their Isa’s, even if they are fixed, but providers may charge for this.

Typically, banks charge 90 days for breaking a one-year deal, 180 days for breaking a two-year deal, 270 days for a three-year deal, and 365 days for closing a five-year deal.

It is therefore expensive to break Isas, and you may not get all your money back, especially if you break early in the term.

However, savers can at least get their money back if the worst happens.