Fixed Rate Savings account renewal due

IanMoone

My 5 year fixed rate savings account with the Skipton comes to an end on 2nd Feb 2022. I must be honest I thought I had another year left on it - so my bad.

They sent me my options and their renewal for 5 years is 1.44% monthly.

When I took this out in Feb 2017, I got 1.98%.

I'm a little confused as to the difference considering the BOE interest rates in Feb 2017 were 0.25% and that is currently where they sit 2022.

I know interest rates have only just risen in December from 0.1%, so are the Building Societies not reflecting this yet?

If this is the case, how long before interest rate rises bleed through?

Would you advise, to take out a renewal for say 12 months (0.6%!!) and see what happens.

Any advice would be greatly appreciated.

Malchester

If taking out a new fixed rate account (for whatever length) is right for you there are far better rates thank you have been offered by Skipton. Check Savings Champion best buy comparison to get a flavour of what is available. As of now you can get over 2% on their top 5 best buys and over 1.3% on their best buy 1 yr accounts

IanMoone

Thanks for replying but why am I being offered a lower rate than 2017?

R_P_W

IanMoone said:

Thanks for replying but why am I being offered a lower rate than 2017?

Because they don't need you capital probably 

IanMoone

So am I better off taking a 1 year bond and waiting to see if the BOA interest rates rise through 2022?

kuratowski

It depends.  If Skipton keep their rates the same, then taking a 1 year bond means you would lose out on the higher interest (1.45% vs 0.60%) for 1 year with no benefit.  However, if Skipton did increase their 5 year rate by 0.25% at some point over the next year, then taking a 1 year bond would work out better (as you would then be able to lock in the new higher rate for the subsequent 4 years).

However, there's no guarantee that Skipton will raise their savings rates, not even if the BoE raise interest rates again.  As R_P_W implies, savings rates are determined by market forces, and don't automatically track the BoE rate.

We don't know whether the BoE will raise rates, or to what extent, or how quickly.  At the moment it looks likely, but there are no guarantees.  It's also remotely possible that rates could be cut again!

refluxer

IanMoone said:

So am I better off taking a 1 year bond and waiting to see if the BOA interest rates rise through 2022?

That's what I'm currently doing, but make sure you move away from the Skipton as it doesn't sound like they are competitive for Fixed Rate accounts at the moment. As mentioned above, you can currently get around 1.35% for a 1 Year Fixed.

Another alternative is to look at a Notice Account, the best of which are currently paying around 1%. That way you'd only be 3 or 4 months away from being able to switch if rates rise.

IanMoone

Thanks guys - very helpful

Ocelot

I once had a fixed rate ISA with SAGA paying 1.8%. Their renewal offer for the same term was 0.2%, and base rates hadn't changed since then. It depends whether they want your money or not.

jimjames

If you're repeatedly tying the same money up for 5 year periods is it worth looking at investments rather than cash savings?

IanMoone

jimjames I've never looked at investments. I'm old school and like to know what money is guaranteed monthly.

But please do elaborate.