5% 2 Year Bond?

TerryP

Hi fellow desperate savers,got the email from Martin yesterday with this deal.
http://www.closetreasury.co.uk/premiumgold/
Question: What does anybody think,are interest rates likely to reverse,and go up beyond 5% within the next two years?.I am thinking of going for it,but am a novice at the saving game.Any views,advice would be much appreciated.

Terry

RayWolfe

Of course no one knows. You can't win every one. If you think 5% is good, go for it. If you really do think rates will climb in the short term, split the difference and put some in this and wait for rates to rise and put the rest in something else.
You will never get it perfectly right all the time.

gozomark

FWIW, my expectations on base rate are

Q1 09 1%
Q2 09 0.5%
Q1 10 2%
Q2 10 3%
Q4 10 4%
Q1 11 5%
Q3 11 6%

over the next 2 years, I expect an average base rate of about 2%

Old_Slaphead

I think over next 2 years it will yield a reasonable (prossibly even good, in current circs) rate of return.

As to whether to go for it....depends whether you can spare £10,000+ for 2 years.

Ruffler Bank were offering 4.75% for 1 & 2 years for £5000 (not sure if still available).

gozomark

inflation is likely to average about 1% pa over the next two years - 4% real return is very good

udydudy

Well one thing I would like to point out, though no one can predict interest rates(only expect where it will go). The advantage with fixing your savings interest rate at 5% is that you will benefit from the huge differential between the current base rate(2% till now-- maybe lower after 12pm today)

but that if interest rates go way beyong 5%(unlikely) in the next 2 years then you have the option of withdrawing your money with loss of interest(ranges from 90 days to 180 days) this at the higher range(180 days) would mean 2.5%.

So lets say after 18 months the interest rates go beyond 5% then you can decide whether you would like to withdraw and move to another account with higher interest rate. Though the last 6 months you will not be bothered as for it to make any difference interest rates will need to rise beyond 10%.

I personally fixed all my ISAs (for 4 to 5 years) since early 2007 when Halifax were offering 6%. all are at 6% and 6.1%. I did miss the 6.5%(which was on offer for a period of 6 weeks i believe- cannot win all). The last one was with northern rock for 5 years as late as Nov 2008. all have 180 days penalties should I need access to it.

I do not expect to need it but then am happy as 1% today is not what i would like to earn!!.

IMHO, I think anything upto 3% fixed for next 2 years is a viable option as it would need interest rates of over 6% (in 2 years) for it to be a losing bet.

udydudy

Just checked their site. Close brothers do not seem to have any kind of access at all for 2 years. but I would suggest asking them as I am not sure whether this is allowed? I would have though there would have been access with some penalties on interest. Without any access at all i owuld think it is a bad bet unless you are really sure you do not need any access at all for 2 yrs on £10k

maybe some more experienced MSE can give their opinion on that.

alanq

See http://www.closetreasury.co.uk/tc-21.htm.

This account is already being discussed here.
http://forums.moneysavingexpert.com/showthread.html?t=1391139