fix for one year or two?

Froglet

I am sure this question will have been asked before but what is everyone's considered opinion on whether it is wise to tie up money for 2 years rather than one?.I have only been using 1 year fixes but have the opportunity to fix with principality for 2 years as I am over 50,at 4%.

Would you think this is a wise move? not worried about not being able to access it for 2 years,just focussing on whether rates will be better than 4% in a year or so's time?

And no,i don't have a crystal ball any more than we would all like to have!!

Thanks in advance for any advice or thoughts on the matter.

Primrose

Looking at the state the economy is in, and the current low Bof E interest rate, I find it difficult to believe that interest rates will rise as quickly again as they have plummeted since last September but I'm not an expert. People are forecasting that inflation will soon start to rise again, in which case, this could mean higher interest rates again, but my own feeling is that tying up for 2 years rather than one may not necessarily leave you worse off. If you are relying on the interest from this money for income, at least you will know what you will be receiving for 2 years rather than one, which may help your budgeting. Oh for the benefit of hindsight!! Wouldn't we all have done a lot of things differently if we'd been able to read the future last August before the whole system started crumbling!

malik999

No right or wrong answer on this one. Long than 2 years i would say no but 2 years @ 4% is just as good a choice as 1 at the moment. Personally i am going to keep with the 1 year bonds and take my chances.

natman

Hi,

I have just opened a fix for one year, at principality at 4.5%
http://www.principality.co.uk/default.aspx?page=1111

I suppose yeah there is no right or wrong answer.
Good luck

nrsql

My view is that at 4% you probably aren't going to lose that much by fixing for 1 year (at most 4% if everything is 0% at that time).
But you could lose out on a lot if interest rates increase.

I not going for more than a year on that basis - not even trying to predict what might happen this or next year, just trying to keep my options open.

ed123_2

....I think if you look at the best one year rates compared to two years plus they tend to be lower(ie banks/bsoc's expect rates to rise in the longer term). With a two year you may gain a bit at this end and lose at the closing months. I have read that the rpi could be negative till spring 2010 so you may not get such a good rate when the one year accounts end. It is v differcult to call but as you have some one year accounts it may be wise to "spead your bets" and go for a two year account.

Stavros_3

Me personally would fix at 4% for 1 year, things could be a whole lot different in 12 months time, but at the end of the day its a gamble, and its your choice to put the chips on Red or Black

D1zzy

6 of one & half a dozen of the other. The good thing about a 2 yr investment - you don't have to think about it for 2 years!!! If interest rates do shoot through the roof you can always take it out and pay the early withdrawal penalty at 4% thats probably not that much

geepster

Froglet wrote: »

I am sure this question will have been asked before but what is everyone's considered opinion on whether it is wise to tie up money for 2 years rather than one?.I have only been using 1 year fixes but have the opportunity to fix with principality for 2 years as I am over 50,at 4%.

Would you think this is a wise move? not worried about not being able to access it for 2 years,just focussing on whether rates will be better than 4% in a year or so's time?

And no,i don't have a crystal ball any more than we would all like to have!!

Thanks in advance for any advice or thoughts on the matter.

Its interesting to see that quite a lot of Building Societies are offering fixed rates at these current poor levels for 3, 4 and even 5 years. I don't remember any of them offering these sort of terms when the rates were 6% plus! This makes me think that they definitely believe the rates will increase in the next year or two. I've recently fixed with a couple of organisations for 1 year and will have some more to fix later this year but, again, will only fix for 1 year. It's all a bit tricky.;)

Froglet

Thanks all for taking the time to reply with your thoughts .Yes,with hindsight i would have taken out a 2yr fix on the ones i only fixed for a year.They mature later this year and i am concerned about what to do then as there will be a tremendous difference in the interest rate.Rates have dropped quickly,are they going to go back up as quick though?

I never fix more than 5k at any one place or time anyway ,as you say,it is better to spread your bets,and with different institutions too.

The longer i take to decide,the further the rates fall so i don't want to dither too long!!