ybs fixed (15months)6.5% gross

freddysmith

If I have £10,000 in my account on the 1st Nov 2008, what will be the total interest I will receive on the 31st Jan 2010 when the bond finishes?

oldfella

there is some confusion about how YBS are calculating interest, but its probably around £845 before tax

freddysmith

oldfella wrote: »

there is some confusion about how YBS are calculating interest, but its probably around £845 before tax

That seems ok for a 15 month term with interest rates on the way down.

savetilibleed

DimSum wrote: »

I already did but person did not know and just organised for a recalculation. Had no idea of how long this would take either.
I was hoping MSE here would know.

Some time ago I asked for detail for YBS of how the interest was calculated as I'd been expecting more. I received a full reply with every step and change made accounted for. I didn't wait too long - thought I can't remember how long. Besides it is worth waiting for a thorough answer.

sloughflint

oldfella wrote: »

there is some confusion about how YBS are calculating interest, but its probably around £845 before tax

Whilst there is a bit of confusion how they reach the AER purely for comparison purposes, they do state that they calculate interest daily and quote gross per annum rates, so the interest should be:

10000*457/365*0.065*0.8=£651.07 net

oldfella

sloughflint - oops - probably not as much confusion as was in my mind when I did the calc

I intended to use 6.5% gross to work it out.

sloughflint

oldfella wrote: »

sloughflint - oops - probably not as much confusion as was in my mind when I did the calc

I intended to use 6.5% gross to work it out.

I'm just looking at their website and they offer monthly interest (6.31% gpa / 6.5% AER) but must be paid outside the account.
That combination is only valid if interest paid into the account.More false advertising.

savetilibleed

sloughflint wrote: »

I'm just looking at their website and they offer monthly interest (6.31% gpa / 6.5% AER) but must be paid outside the account.
That combination is only valid if interest paid into the account.More false advertising.

Not really false. All institutions advertise using AER for comparison. If the same 6.5% was added to the account each month, the interest would compound and at the end of a year would be more than 6.5% - actually 6.7% by my reckoning. You only need to click the Interest Rate for e-bond link and the different rates are clearly stated.

oldfella

you miss the point savetilibleed - if you cannot pay the interest back into the account, you cant guarantee you will earn 6.32% on it, in which case over the year it doesnt earn 6.5%

sloughflint

savetilibleed wrote: »

Not really false. All institutions advertise using AER for comparison. If the same 6.5% was added to the account each month, the interest would compound and at the end of a year would be more than 6.5% - actually 6.7% by my reckoning. You only need to click the Interest Rate for e-bond link and the different rates are clearly stated.

You haven't understood what I'm saying.
For the monthly option,interest is calculated daily from the gpa rate ie 1/365th of 6.31% of the daily balance. Interest is then paid on a monthly basis.
After 12 months,if and only if interest was left in the account to compound then this would equate to an AER of 6.5%.
A possible calculation to check this might be:
12*[1.065^(1/12)-1]=0.0631

YBS are insisting that the interest is paid to an external account so to me, this is false advertising. AER is used as a tool for comparison purposes. Many people uncomfortable with the maths simply rely on looking at the AER to decide on best buy products.

I know YBS are obliged to state an AER but they should put some sort of a note of explanation; a bit like their botched attempt with that 30th of November rubbish.