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Savings: Best fixed rate vs best variable

I've got £30,000 to invest and would be happy to have it locked away for at least two years. Which do you think is the better option:

1) The 2-yr FIXED Premium Gold from Close Brothers at 4.3%
or
2) The VARIABLE High 5 from Investec, currently at 3.11%

I'd like to go with Investec as it will enable me to add to the account after opening it (it would be a bit of rush job to get the Close Brothers account set-up) but do you think I would be losing out majorly by doing so? Basically - is the 3.11% likely to rise or fall massively in the next 2 years?

Any advice much appreciated.

Comments

  • Baz_2
    Baz_2 Posts: 729 Forumite
    I've got £30,000 to invest and would be happy to have it locked away for at least two years. Which do you think is the better option:

    1) The 2-yr FIXED Premium Gold from Close Brothers at 4.3%
    or
    2) The VARIABLE High 5 from Investec, currently at 3.11%

    I'd like to go with Investec as it will enable me to add to the account after opening it (it would be a bit of rush job to get the Close Brothers account set-up) but do you think I would be losing out majorly by doing so? Basically - is the 3.11% likely to rise or fall massively in the next 2 years?

    Any advice much appreciated.

    Although not directly linked the bank of England base rate, the investec rate will in all probability move as the base rate moves. Therefore as the base rate is now at its lowest, the only way it can go is up.

    It wont take much of a rise, i.e 1 - 2 % for the ivestec rate to be the same or better than the close brothers rate.

    So if you think interest rates will get to 2-3% within the next 6months to a year, I would open the investec account of the two you listed.
  • Rafter
    Rafter Posts: 3,850 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    You are basically trying to second guess the swap market.

    The market thinks that on average rates will be 2% higher by the end of 2010 than they are now. Hence close brothers are able to offer 1% higher than a variable rate account.

    Your other risk is that the investec account is not guaranteed to rise with base rates, although it is highly likely it would.

    Thirdly you need to think about flexibility and security of your funds locked away for two years - but you are under the £50k guarantee limit if anything did happen to close bros.

    Personally I think rates will stay low for a while, therefore the fixed account would be better. But I wouldn't chose close bros despite the guarantee. Would just choose a more recognised savings provider - even if that meant a bit less interest!

    R
    Smile :), it makes people wonder what you have been up to.
  • Thanks for your replies, guys.

    I have have heard conflicting arguments on here as to whether Close Bros. is riskier than any other bank but was of the mind that as long as the bank I chose has the £50k protection then I'm okay. Or is that just naive?

    Supposing I took the fixed rate route, as Rafter suggests, would ICICI Bank be a 'more recognised savings provider' (I'm quite new to this you see)? They have a 2-year fixed rate at 4.1%. Or do you mean a big high street bank?

    Many thanks.
  • kiboy6
    kiboy6 Posts: 21 Forumite
    If you do go for Investec PM me for my details. We'll each get 50 pounds under their referral scheme :)
  • G_M
    G_M Posts: 51,977 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    For other Investec pros and cons see here. The 6 month £50 bonus seems to have been extended so still available, though the free ipod option has gone. See here. Full details of High 5 account is here. PM me for any other info.
  • I've got £30,000 to invest and would be happy to have it locked away for at least two years. Which do you think is the better option:

    1) The 2-yr FIXED Premium Gold from Close Brothers at 4.3%
    or
    2) The VARIABLE High 5 from Investec, currently at 3.11%

    I'd like to go with Investec as it will enable me to add to the account after opening it (it would be a bit of rush job to get the Close Brothers account set-up) but do you think I would be losing out majorly by doing so? Basically - is the 3.11% likely to rise or fall massively in the next 2 years?

    Any advice much appreciated.
    The Close Bros offer is gone now anyway.
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