5-Year Fixed Savings Rates in 2023

creditavenger

"The only function of economic forecasting is to make astrology look respectable."

Ezra Solomon 1920–2002 Burmese-born American economist in Reader's Digest 1985;
often wrongly attributed to J. K. Galbraith following a humorous piece in U.S. News & World Report 7 March 1988

Millyonare

Good posts.

Continue to monitor daily. It does feel like 4% will be doable, but 5% is touch and go.

aroominyork

If you want to know the ‘right’ rate for a secure five year bond, one method is to see what a tradeable gilt would pay since this reflects the market’s view about future interest rates. Treasury 4.25% 07/12/2027 Gilt (TR27) is trading at Sell 109.01, Buy 109.81, so a mid-point of 109.41. It will pay £4.25 5.5 times before redemption so, by 7/12/27, you will receive £123.375. That is a return of 123.375/109.41 = 12.76% over 5.30 years = 2.41% pa. Ignoring whether comparable bank/building society bonds are paid annually or on maturity (ie compounding), you could say that anything over 2.41% exceeds the market’s expectations. But since you can today get 3.5% on a fixed five year savings bond you could equally say that gilts are poor value unless you want to pay a premium to have the option of trading them when you think there is a profit to be made.