Newcastle Building Soc - New 5 year-5% BOND (Not an ISA) NOW CLOSED

Steve_xx

Newcastle Building Society will launch a new 5 year, 5% bond on 1st July. It will be phone operated. Maturing on 31 July 2014 it will have a minimum investment of £5k. Early withdrawals permitted on 90 days loss of interest. Not sure whether the loss of interest is only on the amount withdrawn or on the whole balance? Further additions are allowed as long as the bond remains open.

This BOND should not be confused with the similarly named ISA.

Update 1st July. Contrary to my comment above, it appears that the bond, whilst subject to 90 days notice for withdrawals, will not incur a loss of interest for the 90 days.

treecity

Hmmm, not impressed at 5% for a 5 year bond. When you can currently get 4.5% for a two year fixed I can only imagine it won't be long before we see 5% for 2 year and even 1 year.

Steve_xx

Yes I take your point. The appeal in it is that you have some security at 5%, and you can, if you so wish, get out with 90 days loss of interest. So I think it does have some merit.

alanq

Yorkshire Bank / Clydesdale Bank are also offering 5% for 5 years. Access (by closure) with penalty depending on number of days remaining until maturity. There has been talk of a possible double-dip recession. Most of us have expected interest rates to rise to damp down inflation during an imminent recovery. What if that recovery takes a while to arrive? Perhaps interest rates may not rise as fast as we have been assuming. Looked at that way 5% for 5 years doesn't seem that bad.

Steve_xx

alanq wrote: »

Yorkshire Bank / Clydesdale Bank are also offering 5% for 5 years. Access (by closure) with penalty depending on number of days remaining until maturity. There has been talk of a possible double-dip recession. Most of us have expected interest rates to rise to damp down inflation during an imminent recovery. What if that recovery takes a while to arrive? Perhaps interest rates may not rise as fast as we have been assuming. Looked at that way 5% for 5 years doesn't seem that bad.

Yes I tend to concur with your thoughts. To reiterate, you can get out after 90 days, so you're not absolutely locked in.

Arthurian

I can figure out that the first year's interest on the maximum safe amount of £50,000 will be £2500. Could someone please help by figuring out what the 5% would effectively reduce to if I changed my mind on July 1st next year and took my money out, forfeiting 90 days interest? Would it be 3.75%? And if I took my money out at the end of the second year, then I would have earned 5% in the first year, 3.75% in the second year, average = 4.375%?

I wish Martin had been around when I was at school, to point out the use of maths lessons.

Steve_xx

Jonbvn wrote: »

This is not a Bond!

It is a fixed rate ISA. http://www.newcastle.co.uk/savings/5yearfixedrateisa

No, no it is a bond. Confusingly there is also an ISA with a similar name. The bond is not launched until tomorrow.

Jonbvn

Steve_xx wrote: »

No, no it is a bond. Confusingly there is also an ISA with a similar name. The bond is not launched until tomorrow.

OK thanks!

alanq

Steve_xx wrote: »

It will be phone operated.

Moneyfacts says phone AND INTERNET operated.

http://www.moneyfacts.co.uk/Article/79691/newcastle-bs-climbs-the-fixed-rate-bond-league.aspx

Update:
"The account can be applied for online or via our Contact Centre" but access is "by post".

As with the ISA, access is available at 90 days notice. Contrary to the first post, there is not a loss of 90 days interest.

http://www.newcastle.co.uk/savings/5yearbond

Reaper

I was just about to post the same. That means the terms are exactly the same as the ISA which changes this from an undesirable to highly desirable account.

Steve_xx

Reaper wrote: »

I was just about to post the same. That means the terms are exactly the same as the ISA which changes this from an undesirable to highly desirable account.

Yes, but remember that only the first 50k is protected under the FSCS, be it ISA or savings!