Fixed rate bonds

Happychappy

Hi, I have a couple of fixed rate bonds which are due to mature in the next couple of weeks, I took out six seperate bonds last year all around the 7.1 - 7.2% fixed rate, one has just matured, five to go

Clearly the rates available now are sigificantly lower, I have already put 50k into the Newcastle 5 yr fixed rate with a 90 day notice for withdrawal, I am now looking at a couple of 5 yr fixed rate bonds paying around 5.2% with a 90 day loss of interest for early withdrawal.

I dont expect to have any need for the money within the next three to five years or so, and am considering whether to put the money into 5yr fixed rate bonds knowing I can withdraw the money if required, subject to the 90 day loss of interest and am wondering would this be significantly worse off rate wise, then say to take out various 12 month fixed rate bonds paying around 3.4% ?

Hopefully you can see what I mean, also hoping I dont need the money and not really having anything else which will pay over 5%, I will also have the fall back of early withdrawal which I know would bring the rate down, but this would possibly still pay be more than a 12 month rate? any mathematicians out there who could see if this is a viable option?

I have five bonds in total due to mature before December.

Thanks HC

Lokolo

Whats the rate on the 5 year bond?

If I assume its 5%.

1 year bond = 3.4%
1 year of the 5 year bond + withdrawal = 5% - 1/4 = 3.75%

withnell

Care to share the details of these bonds? I've only been able to find HBOS at 5.15% with early access - all other places I've looked have been no access / 1 year penalty

Happychappy

Hi

The AA savings bond which matures in two weeks offers a 5.15% gross with access permitted subject to a 90 day loss of interest only on the amount withdrawn, this seems like a decent punt ?

Ifts

withnell wrote: »

Care to share the details of these bonds? I've only been able to find HBOS at 5.15% with early access - all other places I've looked have been no access / 1 year penalty

Birmingham Midshires do a 5 year bond with a 90 day early access penalty on the amount withdrawn

5 Year Fixed Rate Bond (Annual Interest)

Although the HBOS, AA and BM institutions all share one FSA registration: Link

psychic_teabag

ISTR reading a post here recently which pointed out that the lost of interest is the gross amount, even if it is paid to you net. So even though the net annual interest is 4%, you lose 90 days (1/4 of a year) at 5%. But I may be misremembering, or maybe it was some other situation. Something to double-check, anyway.
If that's the case, then if you withdraw after one year, you get (4-1.25)% net which is equivalent to 3.4% gross.