AA Fixed Rate Savings Acc about to mature! What new deal to choose?

Ifts

dougz wrote: »

Why do you think that? To profit from early withdrawal you need to find a new home for the money that will yield at least 1.24% more total interest than the bond would have over the remaining period to the maturity date. Thus the nearer you get to maturity the less time there is to recoup the penalty.

Thanks what you say is correct but thats if you want to re-invest the money to obtain a better rate you would have to factor in the 1.24% but not if you wanted to withdraw the money to spend.
What I meant was if you cashed in the bond in the 1st year you would get about 3.79% after the 90 day penalty but say you cashed in the bond in the 3rd year it would be averaged out to 4.62% after the 90 day penalty.

dougz_2

Ifts wrote: »

What I meant was if you cashed in the bond in the 1st year you would get about 3.79% after the 90 day penalty but say you cashed in the bond in the 3rd year it would be averaged out to 4.62% after the 90 day penalty.

Sorry I misunderstood what you meant above. However, from my glances at comparison sites the 3 year figure is beaten by Barnsley BS 4.70%, yet I don't see a 1 year that beats 3.79%?

Ifts

dougz wrote: »

Sorry I misunderstood what you meant above. However, from my glances at comparison sites the 3 year figure is beaten by Barnsley BS 4.70%, yet I don't see a 1 year that beats 3.79%?

In no way is this 5 year fixed rate savings bond the Holy Grail, its just at the moment it suits me because:

• Easy to renew my existing bond at maturity if I stay with the AA
• Early access is permitted to the funds should I need the money
• In case rates do go down I'm guaranteed 5.03% Gross p.a./5.15% AER (4.02% Net)
• Monthly income

There are better rates out there, for example there are a few 5 year bonds paying 5.30% but they don't offer monthly income at that rate, no access to your funds for the 5 year term and if access is permitted you pay a whopping 360 day penalty, which on a 5.3% paying account, means it would be 1.76% after a year.

I still have a few weeks before I have to give the AA my maturity instructions on my current bond so if something better comes along thats suited to my requirements I will go with that.

D1zzy

Ifts wrote: »

On the 5 Year Fixed Rate Bond - Monthly Income - 5.03% Gross p.a./5.15% AER (4.02% Net) if you closed the account and paid the 90 day penalty before maturity it would work out something like this:

Year 1 - 5.03/365x90 = 1.24 so 5.03-1.24 = 3.79%
year 2 - 5.03+5.03 = 10.06-1.24 = 8.82/2 = 4.41%
year 3 - 5.03+5.03+5.03 = 15.09-1.24 = 13.85/3 = 4.62%
and so on for years 4 & 5

Am suffering from caffeine depletion - so does this calc take account of the fact that the 90 days is loss of gross interest and that tax is still payable on the full amount..

I have a saga offer of 5.1% for 5 years and 4.3% for 2 years - I did a rough calc comparison assuming 10K investment and withdrawal from a 5 year bond after 2 years - and the difference after tax was about £30.

natman

Hi, Yeah I am in the same boat too.

I have just had an ICICI at 7.2% end and a Kaupthing edge 7.1% end.

Theres nothing comparable to those deals anymore obvioulsy, and anything close means you have to tie your money away for a wacking amount of time.

I have stuck at present with an instant access account at 3.30% and a regular saver at 6%. I know that the 6% regular saver is not around, but there are 5% around.

The instant access account is there to drip feed the regular saver, but is also there in wait for say a fix term account to come up, which i amhappy with duration of time and interest rates......

I refuse to fix for so long at the current rates when i can get 3.30% and 6%.
In addition I have seen others open Abbey and Alliance current accounts to get the 6% on money up to around £2500.

but for me, i am waiting, with a regular saver and decent instant access account.
I too have a Coventry Build society fix term account that matures in December at 6.5%.

Its a tough call, but I think interest rates will go up and fixing for say 5 years is too long, but just my opinion.

nilrem_2

natman wrote: »

Its a tough call, but I think interest rates will go up and fixing for say 5 years is too long, but just my opinion.

I have to agree with you, of course no one can know what rates will be like in 5 years time but the fact that they are offering fixed rates such as these for 5 years indicates to me that they expect rates to be higher then and they want your cash now at lower cost than when rates go up.

The rates are attractive ATM but I will not invest for more than 2 years at fixed rates ATM, rates are (IMHO) more likely to go up than down in the near future.

apt

But you are missing the point made by the two posters above - which I am grateful for as I was going to go for the 2 year fix - that the AA five year fix beats the current 2 year fixes on the market even if you withdraw after 2 years as well as giving you the option of continuing to get over 5% if interest rates are still relatively low in 2 or 3 years time. This flexability makes it a better option than the table topping 3 and 5 year fixes which have slightly higher rates but either allow no withdrawals or exact a very high penalty.

D1zzy

apt wrote: »

But you are missing the point made by the two posters above - which I am grateful for as I was going to go for the 2 year fix - that the AA five year fix beats the current 2 year fixes on the market even if you withdraw after 2 years as well as giving you the option of continuing to get over 5% if interest rates are still relatively low in 2 or 3 years time. This flexability makes it a better option than the table topping 3 and 5 year fixes which have slightly higher rates but either allow no withdrawals or exact a very high penalty.

After following this thread -I finally did a spreadsheet comparison of my current Saga offer of 2 years at 4.3% or 5 years at 5.1% with withdrawal after 2 years, and the net interest on both was virtually the same. (I'd upload/copy the sheet if I could stop everything going out of line)
Anyway having been against going for anything over 2 years I have now opted for the flexible 5 year option - so thanks to all for your input.

Ifts

I chose to go for the AA 5 Year Fixed Rate Bond - Monthly Income - 5.03% Gross p.a./5.15% AER (4.02% Net)

Posted the maturity instructions form (for existing 1 year bond maturing 20th Oct) on the 13th Oct with cheque for additional funds from my Halifax current account. The cheque got credited to existing bond 15th Oct! and today the new 5 year AA bond (funds from matured bond + additional deposit) is showing when I login on line. All done in under a week

soulsaver

Ifts wrote: »

I chose to go for the AA 5 Year Fixed Rate Bond - Monthly Income - 5.03% Gross p.a./5.15% AER (4.02% Net)

Posted the maturity instructions form (for existing 1 year bond maturing 20th Oct) on the 13th Oct with cheque for additional funds from my Halifax current account. The cheque got credited to existing bond 15th Oct! and today the new 5 year AA bond (funds from matured bond + additional deposit) is showing when I login on line. All done in under a week

I can top that... I posted mine on Saturday morning, and the additional funds are showing in my AA ftb this (Tues) morning. I had to do a special tranny to my current ac to ensure the cheque didn't bounce...:T
Only downside is I had to take the funds out of my Halifax Reward Saver that was getting 6% til end of November:( and only one more withdrawal before I lose the rate:(