Birmingham Midshires

oldagetraveller

I'm considering investing in B M's 5.26% gross/AER 1 year fixed bond. Opinions please as to whether this could be a good move or might interest rates rise sufficiently in the next 12 months making a variable rate investment better? Or would a partial use of my savings pot be more satisfactory?

caveat_emptor

oldagetraveller wrote:

I'm considering investing in B M's 5.26% gross/AER 1 year fixed bond. Opinions please as to whether this could be a good move or might interest rates rise sufficiently in the next 12 months making a variable rate investment better? Or would a partial use of my savings pot be more satisfactory?

5.26% for a year looks good to me. If BoE rates rise it's likely to be 0.25% (any more will rock the economic boat) so even if savings interest rates rise by same amount (unlikely) the best variables are only going to be 5% at most.

Limes

Not an expert but the mere fact that you're getting 5.26% on the fixed rate bond is probably reason enough to put something into it rather than stick to a variable rate account. Over recent years when the Bank of England monthly meetings have resolved to change rates they have done so by 25bps either up or down. As there appears to be a majority of better variable rate payers at bank base rate, you'd be looking at the need for 3 consecutive rises - and quick ones at that (although 2 might do it for some of the higher paying accounts, or 1 if you're with ICICI!!!).

From everything I've read about the MPC decisions they've been fairly hesitant to do anything about a rate rise - although there are some analysts saying that is might be on the cards later in the year. Couple this with the fact that the last remaining voice on the committe last month who was pushing for a rate rise died last week and they still have a space from the last person who left the committee a couple of months prior to that, I would suggest that there is no appetite on the committee at present to push rates up at the moment.

The US Federal Reserve and the European Central Bank have both recently pushed their rates up but that may not necessarily mean that the BofE will follow suit. Mervyn King has been quite critical of these recently. Times are likely to be a bit interesting over the next short while and it's just my personal opinion but I don't think rates are going to rise dramatically enough within the next 12 months to warrant a variable rate account as a preference to this fixed rate bond you mentioned.

I am not a financial advisor - just airing an opinion!!!!!!

oldagetraveller

Yes, I was of the opinion it is a good rate even if, as previous posters have said, rates might rise in the year. Even if they rose say 0.5% then it's still a failrly safe bet. I think I'll give it a go with a sum I'm happy to tie up for a year.
Just looking for some agreement with my way of thinking before I posted.:D
Thanks for that.

$17mma

Would this not be better as it is in ISA? would the bond not be taxable?http://www.halifax.co.uk/savings/fixedISA.shtml

oldagetraveller

$17mma wrote:

Would this not be better as it is in ISA? would the bond not be taxable?http://www.halifax.co.uk/savings/fixedISA.shtml

Yes but I've already used up my ISa allowance for this year and I've just transferred out of the Halifax because they didn't send necessary form(s) (twice) to enable transfers in to their fixed rate ISA from variable rate ISA and another provider. So unfortunately wouldn't go near them again. Plus I will be investing more than £3000.
Thanks for link and logical suggestion though.