Cant decide on Fixed Bond Term .. Help Please!

jaqui59

Hi everyone

Ive got some money that I want to put into a Fixed Rate Bond, but don't know how long to lock it up for considering the Economic Climate.

Just wondered what everybody else is thinking on this?

Thankyou

Lokolo

Why don't you split it up and put it in varying lengths?

Like if you have £10k. Put £2.5k in 1 year fix, £2.5k in 2 year fix, £2.5k in 3 year fix and £2.5 in 4 year fix...

RetiredInThailand

I just put 90% of my cash into several onshore 5-year bonds, with the other 10% in instant access for emergencies.

TCA

RetiredInThailand wrote: »

I just put 90% of my cash into several onshore 5-year bonds.

Did you just choose the best rates from somewhere like below?

http://moneyfacts.co.uk/compare/savings/fixed-rate/long-term-bonds/

Or any other considerations?

opinions4u

jaqui59 wrote: »

Hi everyone

Ive got some money that I want to put into a Fixed Rate Bond, but don't know how long to lock it up for considering the Economic Climate.

Just wondered what everybody else is thinking on this?

Thankyou

I'd suggest putting it away for term that fits in with when you want the money back.

Remember you can get 3.20% gross for easy access with The AA, so use that as your starting point.

If you do go for a term deposit typee account, select one that gives you access for a fee (e.g. avoid Lloyds TSB, Santander, Co-op).

oldtoolie

Look at the terms and conditions of the term deposit bond. Most allow the account to be closed early with a reduction of interest paid.

I took a 5 year bond after seeing that I could close it after three years and receive a rate comparable to a three year bond. But if I want I can keep it five years with the higher rate.

jaqui59

Thanks everyone for your replies ... Before asking on here, I was going to find the best rate on a 5 year fixed rate bond, and I think you've probably given me the confidence to do such.

Ive got a good emergency fund set aside, so I don't think im overly worried about locking it up for that time ... Would be gutted though if the interest rate shot up, but somehow I don't think thats ever going to happen!

The highest rate ive seen so far is 4.70% ... If anybody has seen anything better, I would be grateful if you could let me know.

Thanks

RetiredInThailand

TCA wrote: »

Did you just choose the best rates from somewhere like below?

http://moneyfacts.co.uk/compare/savings/fixed-rate/long-term-bonds/

Or any other considerations?

I considered rates and also which establishments allow non-residents to open an account.

nilrem_2

jaqui59 wrote: »

Thanks everyone for your replies ... Before asking on here, I was going to find the best rate on a 5 year fixed rate bond, and I think you've probably given me the confidence to do such.

Ive got a good emergency fund set aside, so I don't think im overly worried about locking it up for that time ... Would be gutted though if the interest rate shot up, but somehow I don't think thats ever going to happen!

The highest rate ive seen so far is 4.70% ... If anybody has seen anything better, I would be grateful if you could let me know.

Thanks

Jaqui, one thing to take into account if you are considering a longer term bond is that even if interest rates climb in a couple of years you will already have had a fairly high rate for the first few years, meaning that for you to be worse off by taking the longer term bond rates will have to climb considerably!

For example after a lot of thought I recently took out a 5yr bond paying monthly interest at a similar rate you quote, I worked out that if rates start going up in year 3 then they will need to be around 6% before I am worse off, you also have the safe guard that if rates were to go sky high (unlikely) you can always take the cash out and invest in the higher rates, you will have to lose quite a lot of interest but it might be worth it with really high rates.

For the last 3 years people have been saying don't fix for long as rates will soon be up but so far they have not increased and some of us would have been better off fixing for 5 years 3 years ago!

Problem is that no one has a working crystal ball!

Ifts

nilrem wrote: »

Jaqui, one thing to take into account if you are considering a longer term bond is that even if interest rates climb in a couple of years you will already have had a fairly high rate for the first few years, meaning that for you to be worse off by taking the longer term bond rates will have to climb considerably!

Agree with the above, thats how I look at it when taking out fixed rate bonds. I usually go for 2 or 3 year fixes, that way it saves having to find a new home for it every year (esp when you have a number of fixed rate bonds). Also with 1 year fixed rate bonds I find you are earning less by the time you have got your hands on the maturing funds and then the money is usually waiting in some current account waiting to be collected for the next fixed term deal you have to sign up for.

As for the rates, I fix for the best available rate for a suitable amount of time, you win some and you lose some, in the end it averages out.

melbury

I have just gone for a one year fixed rate bond (AA 3.6% gross) in the hope that rates will start rising in the not too distant future. They probably won't but I live in hope;)