1 year or 2 year fixed bond?

cagneyfan

Hi, I've just had a bond mature. I now have £45,000 that I wish to put into another fixed rate bond.

My question is: would it be better to put into a 1 year or 2 year fixed bond.

I don't expect to need access to the money. I just don't know if it would be better to put it in for 1 year in the hope that interest rates will improve

D1zzy

I'm doing 1 year and hope interest rates improve. They have already started to pickup from their worst - but its really anybodys guess what will happen in the next 12 months let alone 2 years

musehead

Put it in the 5% five year bond at Newcastle BS. You can exit with 3 months notice and no interest penalty, and get more than 1% on top of any other 1 year bond at the moment. If rates stay low, you can stay in the bond for longer.

DiggerUK

1 year max.

Also spread it around, get a rolling programme of bonds maturing every few months. That way you can always move to highest rate on offer, and have a cash flow coming in if you need it.

Not a lot of difference in your pocket between 3.8 in Skipton and a holding A/C paying 3.00%.

Set up 5 bonds, one every two months, the Skipton is 8 months, the other is 12 months.

http://www.skipton.co.uk/default.aspx

http://www.westbrom.co.uk/westbrom/savings.product?id=4634&category=1

Just 2 examples of what's out there. Load up your favourites with this list, enough to burn your eyes out for a month of Sundays.

http://www.bsa.org.uk/aboutus/buildsocmember.htm

You could also have some fun and use Premium Bonds as a holding A/C.
Rates of 0% to 1 million.

Best of fortune.

juicyjude

Just make sure though that if you are fortunate enough to have more that £50K that you dont put it all into one institution if things go belly up. And that is easier said than done now with all the amalgamations. You have to be savvy on that, Martin has a section here on which bank/building society amalgamated with which. Be careful :money:

DiggerUK

Mandy,
Perfect holding A/C was posted on a new thread.
Hope your over 50 though.

http://www.coventrybuildingsociety.co.uk/

neil324

1 year. Rates are already rock bottom and can only go up. If inflation kicks in,Sterling crisis or IMF bailout which are all not beyond the realms of madness then you could get burned.

cagneyfan

DiggerUK

What do you think about the Newcastle BS 5 year bond that I can leave with 3 months notice, without incuring penalties, as posted by musehead

zzzLazyDaisy

I am also very interested in the Newcastle BS Bond. Although it is a 5 year fixed rate bond, the ability to withdraw funds on 90 days notice, effectively makes it a 90 day notice account with a 5 year guarantee on the interest rate.

Here is the info from the website:

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


Can anyone see any catches? The only thing I can think of is if any money withdrawn on 90 days notice also loses 90 days interest - but I can't find anything to suggest this is the case

The ONLY reason I'm hesitating is the old addage, 'if something looks too good to be true, it usually is.....'

steveksullivan

I make it that the 'break even' period if you go for the Newcastle 5 yr fix is 6-7 months.

In other words if interest rates stay where they are, the next highest paying account is roughly 3.25%

At between 6 and 7 months at 5%, you would earn roughly the same interest as you would for 9-10 months at 3.25% (i.e. adding the 90 days that you would lose interest by going Newcastle)

on an arbitrary £10000

((10000*0.05)*7/12)*0.8 = £233.33

((10000*0.0325)*10/12)*0.8 = £216.66

Every month after that Newcastle wins - So as long as rate stay around where they are for the next six months its worth the notice period.

Took me a while to get my head round this, so can better mathematical brains than mine either confirm this, or tell me where I'm going wrong?

Also as with last poster - any catches we're missing?




Took me a wjile to get my head roud this

SnowMan

zzzLazyDaisy wrote: »

I am also very interested in the Newcastle BS Bond.


Can anyone see any catches? The only thing I can think of is if any money withdrawn on 90 days notice also loses 90 days interest - but I can't find anything to suggest this is the case

It does seem too good to be true but in this case it does appear to be true. I've invested.

They have confirmed to me over the phone there is no penalty (i.e. you don't lose 90 days interest).

I emailed them to ask for confirmation prior to the phone call. I had asked about the fixed rate account outside of an ISA but they replied as if I had asked about the ISA. As I think they have identical terms I believe this still has relevance.

QUESTION
Good morning

Just applied for the 5 year fixed rate 5% account (see above application reference)

It says in the product terms that “withdrawals are permitted subject to 90 days notice. Withdrawal requests must be made in writing.”

As there is no mention of any withdrawal penalty or loss of interest I am assuming that there is no penalty provided the 90 days written notice is given.

I am investing on this basis but please can you confirm this is the case.

Thank you

SnowMan



REPLY

Dear SnowMan.

Thank you for your recent Email.

You are permitted to withdraw or transfer your Isa to another provider within the 5 year term provided you give the 90 day notice. All transaction will be penalty free.
If you have any further queries please contact us on 0845 606 55 22, our opening hours are 8am-8pm Monday - Thursday, 8am-6.30pm Friday and 9am-5pm Saturday.

Yours sincerely,

Newcastle Sales