Fixed Rate Bonds

Mumum

Best to invest in a 1 yr bond as the BOE base rate is predicted to rise to 2.5% next year or in a 2,3 or 5 yr bond as the market is predicted to soon crash?
Many thanks 

Linton

Mumum said:

Best to invest in a 1 yr bond as the BOE base rate is predicted to rise to 2.5% next year or in a 2,3 or 5 yr bond as the market is predicted to soon crash?
Many thanks 

"Market crashing" relates to shares, not the interest from a fixed rate account.  The BOE would like interest rates to rise perhaps until they reach historically normal values, large falls in the medium term are much less likely.

An efficient way of using fixed rate accounts is to construct a "ladder".  Put 1/5th of your money in a 1 year account, 1/5 in a 2 year account ...and 1/5 in a 5 year account.  Then each year as an account matures you can use the money or put it back into a 5 year account.  In that way you are getting the 5 year account interest but having access to 1/5th of your money each year.

ColdIron

Don't confuse interest rates on cash deposits with 'the market'. If you mean the stock market, that's always predicted to 'crash soon'

Mumum

Sorry by crash I meant that interest rates are expected to rise to such an extent that it will lead to a crash, causing savings rates to go right down. Thank you for the replies.

Mumum

Linton said:

Mumum said:

Best to invest in a 1 yr bond as the BOE base rate is predicted to rise to 2.5% next year or in a 2,3 or 5 yr bond as the market is predicted to soon crash?
Many thanks 

"Market crashing" relates to shares, not the interest from a fixed rate account.  The BOE would like interest rates to rise perhaps until they reach historically normal values, large falls in the medium term are much less likely.

An efficient way of using fixed rate accounts is to construct a "ladder".  Put 1/5th of your money in a 1 year account, 1/5 in a 2 year account ...and 1/5 in a 5 year account.  Then each year as an account matures you can use the money or put it back into a 5 year account.  In that way you are getting the 5 year account interest but having access to 1/5th of your money each year.

I hasn't thought of this, thank you. 

Bigwheels1111

To weather the storm, I would go for chase easy access 1.5% or Shawbrook bank at 2% for 6 months.
that’s what I will be doing in August and September with my savings.
there could be 2 boe base rate rises by then.

Mumum

Bigwheels1111 said:

To weather the storm, I would go for chase easy access 1.5% or Shawbrook bank at 2% for 6 months.
that’s what I will be doing in August and September with my savings.
there could be 2 boe base rate rises by then.

Nice. I can only do 1.1% in a 1 Yr bond (long story) in the short term or continue with the 0.55% current account. Both rubbish. Would definitely follow your lead otherwise 👍

Albermarle

Mumum said:

Sorry by crash I meant that interest rates are expected to rise to such an extent that it will lead to a crash, causing savings rates to go right down. Thank you for the replies.

Interesting theory....

Thrugelmir

Mumum said:

Sorry by crash I meant that interest rates are expected to rise to such an extent that it will lead to a crash, causing savings rates to go right down. Thank you for the replies.

Somewhat unlikely. As deposit takers will be forced to offer better rates to both attract money in and reduce transfers out. 

Mumum

Ok, so better to invest the £36,500 in a 1 Yr bond at 1.1% with the idea that savings rates will have increased by next year, a 2 yr bond at 1 7%, a 3 yr at 2.15% or 5 yr at 2.30%? Or keep it in its 0.55% current account with a watch and see approach? 
No other investment suggestions please as these are my only options (as per explained in my previous posts). 
Many thanks for your time.

wiseonesomeofthetime

I think I understand your dilemma, however, if you cannot access the better rates available now, what makes you think you can next year? 

Sounds like you have some tough choices ahead.