How long to fix for

dazza-mac

HI,
I'm just asking for some advice regarding how many years would be best to fix for.

I want to invest some money that I won't need as I have other funds in an easy access account.

However, I was going to invest in a 3 year fixed rate, but I thought I'd ask the experts if in their opinion that would be a good move - or would it be better to stick to a 2 year.

Any advice greatly appreciated

TCA

Fix at what rates? Presumably outside of an ISA?

dazza-mac

TCA wrote: »

Fix at what rates? Presumably outside of an ISA?

Hi, Yes outside of an isa. My 5 year fixed rate bond is about to mature and whilst I'll be using some of the money I want to put the rest in another fixed rate bond. Although I don't need access to the money I don't think I'll put it in another 5 year fixed rate - but I'm deliberating whether to lock it up for 1, 2 or 3 years..

jimjames

If you don't need the money have you considered investment rather than cash? Capital not guaranteed but should be better return long term.

dazza-mac

jimjames wrote: »

If you don't need the money have you considered investment rather than cash? Capital not guaranteed but should be better return long term.

I'm too thick to be let loose where finances are concerned. I'd rather just lock the cash away knowing that I've done something with it rather than leave in the bank getting nothing at all.

I usually just fix the cash - not usually for too long, although I did put it in a 5 year one as the rate was good (5%), but now I know it'd be daft to lock away for that long in case interests rates rise - I just don't know if I should fix for more than 2 years

TCA

dazza-mac wrote: »

Although I don't need access to the money I don't think I'll put it in another 5 year fixed rate - but I'm deliberating whether to lock it up for 1, 2 or 3 years..

You didn't reply as to what the rates are for each of the terms. And depending on what amount of funds you're talking about, it might not make that much difference.

mariner2

I see the Leeds BS has introduced a 10 year bond at 4.07%. A long time to tie money up but is this a sign of a general slow increase in savings rates as I have also noted one or 2 other improving rates such as Virgin money cash ISA at 2.25% for 2 years.
Hopefully signs that better rates may be around the corner for savers. ( I know current accounts paying higher rates are already available but for how long?)

bowlhead99

mariner2 wrote: »

I see the Leeds BS has introduced a 10 year bond at 4.07%. A long time to tie money up but is this a sign of a general slow increase in savings rates as I have also noted one or 2 other improving rates such as Virgin money cash ISA at 2.25% for 2 years.

I've seen a few rates that are a bit better than what they had fallen to, but actually the Virgin fix at that rate is for 3 years now (to July 2017) - same rate whether you have the ISA or non ISA version and do it online or branch/post.

If you were to break early and take it out after 2, you'd have a 120 day interest penalty, so you'd only get paid one and two thirds years of compound interest in your 2 years, which would give you an overall effective rate of under 1.9%, which is less than the 2% you'd find elsewhere from other banks that sell 2 year fixes.

It is sometimes worth looking at the break costs if you're considering a longer fix but are not sure if you will really go all the way to term, if the provider does allow a withdrawal with penalty. Because from time to time you might find that in some instances the longer term rate, less the penalty, is better than the shorter fix from the same provider.

Of course this only works with places that actually let you get out and take that penalty. For example at Aldermore, you can get 2% for two years or 2.7% for three years - so the three year rate is substantially better than the two year one or the three year Virgin one - but if you really did need the money back in two years you'd be stuffed, while Virgin would let you get out if you swallowed the penalty.

I'm not swayed by the 10 years no access account at Leeds as I presume that over a period that long, there are other, more liquid investment opportunities that could outperform it albeit with investment risk. Knowing they don't have to give it back for an entire decade, Leeds themselves will certainly be looking to lend it out at well over 4%, so that's quite a high effective 'management fee' you'll be paying them to guarantee you the fixed rate return... Even without taking an investment punt, if we assume base rates rise over the next couple of years like people are expecting, it would be more sensible to take a rather shorter fix and then try to get, say, a 5-8 year fix when market conditions have improved, if you absolutely must stay in cash a whole decade.

I suppose one thing with the Leeds account is that it does pay out interest monthly rather than rolling it all up, so at least you can redeploy that interest into other better opportunities as they arise.

dazza-mac

TCA wrote: »

You didn't reply as to what the rates are for each of the terms. And depending on what amount of funds you're talking about, it might not make that much difference.

Hi,
I was looking at the 2 year fixed rate with First Save at 2.3% and the 3 year fixed rate with Shawbrook Bank st 2.75%.

Does anyone think a 3 year fixed rate is wise bearing in mind the rates could go up, or do you think that I'd not get much better than that bearing in mind I'm useless with finances. I just want to ensure that I don't just let it sit somewhere getting absolutely nothing back.

I'm not keen on investments in shares etc. Just want to know I've done something with the cash and then not have to do anything until I have to!

I know I must be like a hand down a blackboard to all you super savvy savers - but as soon as I look at facts and figures I just seem to get number dyslexia!

TCA

dazza-mac wrote: »

I was looking at the 2 year fixed rate with First Save at 2.3% and the 3 year fixed rate with Shawbrook Bank st 2.75%.

Are we talking large sums here? It's not as if savings rates are likely to double in that timeframe.

Eco_Miser

dazza-mac wrote: »

Does anyone think a 3 year fixed rate is wise bearing in mind the rates could go up,

That question was being asked five years ago. The rates didn't go up.

Even if the rates have gone up in the third year, you've had two years at 0.45% over the two-year rate to compensate.