A guide to bond maturity dates
Investing in Fixed Rate Bonds is a little like placing an order and waiting for the delivery date. Excitement and patience bundled into one. When you open a Fixed Rate Bond, you’re setting money aside for a future date – you know it’s coming back, and with a little extra on top. And you can think of the bond maturity date being like the delivery date for your savings!
But what does the maturity date really mean for your savings? How do different maturity dates impact returns? And what should you consider when choosing the right bond to meet your financial goals? Let’s take a look.
What is a bond maturity date?
A bond maturity date is the date when the bond’s term officially ends, and the money you originally invested, along with the interest earned, is returned to you. Bonds come with different maturity lengths, ranging from short to long-term and so choosing the right maturity for you will depend on your financial goals.
Can bonds gain in value after the bond’s maturity date?
In simple, no. Once the bond reaches maturity, it pays back the original investment and any agreed interest. It can only continue to earn interest if it’s reinvested.
How will I know when my account is maturing?
We’ll contact you by letter or email in plenty of time to let you know your account maturity date to let you know your maturity is approaching. Find out the full timelines and account maturity details here. here. Remember, you need to submit your maturity instructions online or your money will be placed into a maturity holding account.
Types of maturity dates
Not all bonds are built the same - some mature quickly, while others can take decades. Here are the three main types of bonds you'll come across:
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Short-term bonds
These have the shortest turnaround and best for quick investments. Hodge short-term bonds are 1 or 2 years. Perfect if you have more imminent saving goals on the horizon or don't want to tie up your money for too long but still want to earn interest on your cash. Good for: those looking for short-term investments or have a short-term savings goal.
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Intermediate-term bonds
These bonds are around 3-5 years and offer a balance between flexibility and time commitment - giving you a steady return of interest while also being able to see the defined maturity date not too far down the line. Good for: investors who want a mind-length savings plan with predictable interest returns.
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Long-term bonds
Long-term bonds can run from 6 years up to decades - keeping your money safe and growing in interest over a longer period. Good for: anyone thinking about longer-term financial planning and will not need access to your savings in the short or medium-term.
What is Yield to Maturity (YTM)?
Yield to Maturity (YTM) is more relevant for longer-term bonds or tradable bonds which can be influenced by price fluctuations. The calculation is worked out based on factors such as a bond’s current price, the interest payments (sometimes referred to as coupon payments), the time left until maturity.
It can feel complex, but there are online calculators that can help you estimate what your total return will be on maturity. We would always recommend speaking with a professional independent financial adviser.
What influences bond maturity choices?
If you're thinking more long terms, such as retirement planning, long-term bonds could be the right decision for you. The bonds risk level Short-term bonds are generally less risky but can offer lower returns on your investment. Longer-term bonds can provide better yields but can be more sensitive to changes in the market and fluctuations of interest rates. Interest rates If interest rates rise, the value of existing long-term bonds can drop - as newer bonds may offer better returns. Inflation can eat into your returns, so always consider how it may affect longer-term investments.
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Investment goals
Your savings goal will be key in determining the term you choose. If you'll need money in the next few years, such as for a wedding or house deposit, short or medium term bonds could be best. If you're thinking more long terms, such as retirement planning, long-term bonds could be the right decision for you.
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The bond risk level
Short-term bonds are generally less risky but can offer lower returns on your investment. Longer-term bonds can provide better yields but can be more sensitive to changes in the market and fluctuations of interest rates.
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Interest rates
If interest rates rise, the value of existing long-term bonds can drop - as newer bonds may offer better returns. Inflation can eat into your returns, so always consider how it may affect longer-term investments.
Types of bond saving strategies
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Bond laddering
Laddering is when you spread your savings over multiple investments such as bonds or ISAs, each with staggered maturity dates. The benefit here is that you have the option at maturity to either reinvest or use the savings as needed. You reduce the risk of locking in all your funds at one rate and could be able to take advantage of higher interest rates available at the time your bond matures.
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Matching maturities to financial goals
Another strategy is to align your maturity date with a specific financial goal. For example, if you're saving for a house deposit, and you have £10,000 but know it will take you another 3 years to save another £10,000 you need, then you could lock away the £10,000 you have into a 3-year Fixed Rate bond. On the flip side, if you are in your 40s and have a lump sum you want to put away for your retirement, you may want to consider a longer-term bond with a maturity date of 10, 20 or even 30 years.
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Redeeming bonds before maturity
Most Fixed Rate bonds are designed to be held until maturity, but some allow early redemption if you find you need access to your funds sooner than planned. There may, however, be drawbacks such as penalties or fees for early withdrawals like losing out on the full interest you would have earned. If you're considering an early withdrawal, it's always worth checking the terms first.
Hodge bonds and maturity
If you have a Fixed Rate savings account with Hodge that is coming up to it’s maturity date, you have a few options.
One option is to reinvest your savings. You could reinvest your money in an Easy Access account if you want it within reach, or into another Fixed Rate account if you don’t need access to the funds straight away. You can view your Hodge bond and the current interest rates available to you in your online banking portal. Another option is to withdraw your funds to use as you may have planned.
And don’t worry, if time has lapsed and you haven’t made the decision yet of what to do with your funds, we’ll temporarily move your balance into a maturity holding account while you decide what to do. Just note that this account has a low interest rate and is only meant to be used in the short term while you decide what to do next.
You’ll find everything you need to know about your maturity date here.
Hodge Fixed Rate Bonds
At Hodge, we offer 1, 2, 3 and 5 year Fixed Rate Bonds, giving you flexible options to suit your savings goals.
Watch our quick Fixed Rate Bond video and in under two minutes, you’ll have all the basics you need to know about Fixed Rate Bonds, interest rates and how they could benefit your savings plans.
Final thoughts
Bonds are a straightforward way to save, offering clear terms and interest earned. The key will be choosing the right maturity date that works for you.
At Hodge, we’re all about helping you make informed choices whatever stage of life’s financial journey you are on – whether you’re dipping your toe into savings for the first time or you’re an experienced saver. Find out more about our Fixed Rate bonds, interest rates and bond basics here.
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This article is correct at time of publishing and for general information purposes only. We recommend you speak to a professional financial adviser for advice. You can find a financial adviser and further personal finance information at https://www.unbiased.co.uk/
FAQs
Common questions about bond maturity dates