One year or two year bond?

Hungerdunger

My partner and I have £50k which we can invest for two years.

I'm very interested in the current Bond offers from Saga which offer an APR of 7.14% for one year or 6.82 for two years.

Personally, I'm tempted to go for the two year bond as it now seems that the general opinion among "experts" is that the BoE will reduce the Base rate either later this year or early next year, and if there was a reduction of 0.5% or more within the next 12 months, then I think I would be quids in.

What would other people advise? How about £25k in each to hedge my bets?

free4440273

I'm actually after a two/three year bond myself; i think the BofE will cut soon also, perhaps as early as next month by .25. I'd like to lock my monies into a two/three yr bond for that reason. Nationwide's 6.70% one yr bond looks good and i might just go for that because of their good service. my fear is that even that rate will disappear very soon

ivegotabig1

ive just applied for the Midshires 1 yr bond, at 6.95% i think its the highest..unless anyone knows better ??

Hungerdunger

ivegotabig1 wrote: »

ive just applied for the Midshires 1 yr bond, at 6.95% i think its the highest..unless anyone knows better ??

It's a good rate, but the point of my question was to gauge the feeling of where interest rates might be in a year's time.

For example, if you put your money into this one year bond, next September you might only be able to re-invest it at, say, 5.5% if rates have fallen by then; but if you invested it in a two year bond now at 6.5%, you'd actually be better off over the two years.

Old_Slaphead

Personally I think the 1 year rates are too good to resist at up to 7.14% with Saga. I'm therefore allocating any monies available 60:40 on 1 and 2 yaer offerings. If anyone goes to say 6.80% on a 3 year deal I would have to give it serious consideration.

In a year's time I reckon interest rates will still be 5.50-5.75%

free4440273

^same here: i see rates going down to between 4.75-5.0 per cent. never mind inflation; the BofE doesn't give a toss about inflation anymore. CPI at 1.8%. yeah, right...:rolleyes:

Hungerdunger

Old_Slaphead wrote: »

Personally I think the 1 year rates are too good to resist at up to 7.14% with Saga.

Just a word of warning: I've just received application forms from Saga today, and the APR of 7.14% doesn't appear to be achievable.

If you opt for monthly interest, it can't be re-invested in the bond, but has to be either paid into a Saga Secure Savings Account (minimum investment £1,000) which currently pays 5.5%, or to an account of your choice with the warning that "interest payments to non-Saga accounts could take upto three working days to clear."

Having said that, the Gross Rate of 6.92% for one year or 6.62 for two years still appears quite attractive.