New SAGA one year fixed interest account 6.8% APR

Nick_C

SAGA have just put their latest 1 year fixed interest bond on sale. It pays 6.6% gross monthly interest, giving a notional APR of 6.8% gross.

The APR assumes the monthly interest is reinvested at 6.6% but in practice it is paid back to your nominated account each month. SAGA is probably unique in offering the same rate of interest regardless of whether you ask for monthly or annual interest, so the monthly interest option has a higher APR than the annual option!

Money is deposited with Birmingham Midshires (part of HBOS) and the account is available if you are aged 50 or more. These accounts are normally fully subscribed within a week of going on sale!

http://www.saga.co.uk/finance/spf/home_fixed_rates.asp

Hungerdunger

Are you sure about this? I've just signed up to their previous 2-year offer which promises 6.62% gross and APR of 6.82% if you choose the monthly interest option. However, having read their T & C, I don't think the figure of 6.82 is achievable, or in your case 6.8%.

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."

I'm not a financial whizz, but isn't that loss of three working days each month going to affect the actual amount of interest you earn? Especially the worst case scenario where money is due to be paid on the Thursday before Good Friday, but doesn't actually start earning interest until the following Wednesday.

Nick_C

I agree that 6.8% might not achieveable - as I said it is based on an assumed reinvestment of the monthly interest at 6.8%. The key point is that you are better off taking monthly interest not annual interest on this account.

As the Saga bond is with Birmingham Midshires and I bank with HBOS, I am hoping that this might transfer into my account overnight - if it does, it will go straight into Sainsbury's at 6.25% (HBOS again so no delay) and from there to YBS at 7.1% with a 3 day delay. I won't even attempts to work out the APR on this!

Primrose

Nationwide are currently offering a one year bond at 6.7% to existing customers (otherwise 6.6%) but it is apparently "flying off the shelves" and will be withdrawn at the end of this month because of all the Northern Rock surplus money floating around in the system.