Atom Bank has launched a new one-year fixed rate bond with an interest rate of 2.05% – the first time a fixed rate savings account has paid more than 2% since April 2016.

Atom is an app-only bank: you have to apply for and manage your savings account through the iOS or Android smartphone app. Once you have the app installed, it takes about five minutes to create an account, and you can immediately apply for the new one-year Fixed Saver account.

The minimum deposit amount is £50, and the maximum is £100,000. You have one week to add funds to the account, and then that’s it: you can’t touch your money until the account matures. The 2.05% interest will be paid out after 12 months. If you put £1,000 into the account, you would earn £20.50 in interest. (That interest will be tax free in most cases, too, thanks to your personal savings allowance.)

That might seem like a small amount – and it is! – but it’s the best guaranteed interest rate on the market.

Should you put your savings in a one-year fixed rate bond?

Even if 2.05% is the best interest rate on the market, should you actually get one? It mostly depends on your personal situation. If you have some money sitting around, and you won’t need it for the next 12 months, then a one-year fixed rate bond is a good place to put it.

If you might need access to the money, you should look at instant access savings accounts – but there you’ll only get an interest rate of around 1.3%.

If you can fulfil the strict criteria of a high interest bank account (also known as a regular savings account), then you can obtain an interest rate as high as 5% for 12 months.

With the Bank of England likely to raise interest rates over the next year, one-year fixed rate bonds and bank accounts with short promotional periods could be desirable: if the BoE does hike rates, you’ll be ready to move your money to any higher-rate savings products that emerge.

If you want a greater return on your savings, and you’re okay with a higher level of risk, you can look towards an innovative finance ISA or a stocks and shares ISA, where some products are advertising interest rates as high as 10%. Unlike a fixed rate bond, though, these products don’t guarantee a return – because your money is being actively invested in people, companies, and stock markets, it’s possible for the value of your savings to go down as well as up.

Now read about how to choose a savings account