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Should MIL tie up her savings?
Moniker
Posts: 626 Forumite
My 78 year old MIL has just had a bond of £5000 mature with the Birmingham Midshires. They have offered her 3.9% if she re-invests it for 2 years or 4.65% if she re-invests it for 3 years.
These both seem reasonable to me - the question is should an old lady tie her money up for 3 years even if she is in reasonable health? She only has her old age pension to live on and the income from various investments like the one above - not a huge amount but the interest helps pays for treats.
The problem is trying to second guess which way interest rates will go in the next three years. My gut feeling is that they will struggle to get to 2% by the end of this year and that 3.9% over 2 years is not a bad deal and gives her a bit more flexibility. What do you think? any advice welcome.
Moniker
These both seem reasonable to me - the question is should an old lady tie her money up for 3 years even if she is in reasonable health? She only has her old age pension to live on and the income from various investments like the one above - not a huge amount but the interest helps pays for treats.
The problem is trying to second guess which way interest rates will go in the next three years. My gut feeling is that they will struggle to get to 2% by the end of this year and that 3.9% over 2 years is not a bad deal and gives her a bit more flexibility. What do you think? any advice welcome.
Moniker
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Comments
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Moniker,
No, do not go for anything above a 6 month tie in for now. Yesterdays figures on price inflation are quite spooky. We will all have a clearer picture of interest rates by end of first quarter.
Have you used all her Cash ISA allowance.
Best of fortune.0 -
My 78 year old MIL has just had a bond of £5000 mature with the Birmingham Midshires. They have offered her 3.9% if she re-invests it for 2 years or 4.65% if she re-invests it for 3 years.
Does it have a fixed 90 day penalty for early withdrawals? A fixed term deposit of mine matured in late November; they offered 4.45% for 2 years with a 90 day penalty. At the time they had the sliding scale withdrawal penalty and offered 0.1% less to new applicants.0 -
I expect there is a penalty but I don't know for sure. She doesn't need to withdraw it, she just wants to maximise the interest. I believe she has already used her ISA allawance but I will check. She doesn't have enough income to pay tax usually so this may not be so essential for her. I still think that interest rates will bumble along at the bottom for a while, but that 3 years is a bit too long to keep it tied up - if rates do rise then she will want to invest it again for a better return. The question is will rates be above 3.9% in two years time? I know this is impossible to know for sure but would welcome people's views.
thanks
Moniker0 -
Does she have other money available on instant access should she need it?0
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Halifax do a 2 year fix for 4.1%0
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