6 Month Fixed

DJSINGH

Hi all

I am looking to 6 month fix around 40k. I notice Atom at 2% is top.

Their calculator says I would earn £400 interest.

Can anyone explain why its not £800?

I thought 40000/100 * 2 = 800? So its actual 1% interest I would earn instead??

Any better options otherwise?

ZeroSum

Because its only for 6months.
It's 2% per year.

Zopa are paying 2.05% on a 95 day notice which is  better option

masonic

Why would you expect to earn a year's interest in just 6 months?

refluxer

It's 2% AER which is used for comparison purposes. It only earns half of the AER rate because your savings are only in there for 6 months, not the full year.

DJSINGH

masonic said:

Why would you expect to earn a year's interest in just 6 months?

Its a 6 month fixed account saying 2%. Not a 1 year account, so can you see the confusion?

DJSINGH

ZeroSum said:

Because its only for 6months.
It's 2% per year.

Zopa are paying 2.05% on a 95 day notice which is  better option

Ok fine, so its confusing they advertise a year rate, for a 6month account!

dali21

The 2% rate quoted is per annum.
You would earn £800 at 2% per annum on £40K for a one year bond.  

However for six months, you would still be earning 2% per annum but for half a year, the interest would be £400.

£40k @ 2% per annum for 1 year = £800.

£40k @ 2% per annum for 6 months = £400.

Hope this helps.

masonic

DJSINGH said:

masonic said:

Why would you expect to earn a year's interest in just 6 months?

Its a 6 month fixed account saying 2%. Not a 1 year account, so can you see the confusion?

No, I cannot see the confusion. The interest rate is 2% per year, you will only hold the money in the account for half a year.

DJSINGH

dali21 said:

The 2% rate quoted is per annum.
You would earn £800 at 2% per annum on £40K for a one year bond.  

However for six months, you would still be earning 2% per annum but for half a year, the interest would be £400.

£40k @ 2% per annum for 1 year = £800.

£40k @ 2% per annum for 6 months = £400.

Hope this helps.

Thank you, thats been helpful!

masonic

DJSINGH said:

ZeroSum said:

Because its only for 6months.
It's 2% per year.

Zopa are paying 2.05% on a 95 day notice which is  better option

Ok fine, so its confusing they advertise a year rate, for a 6month account!

All accounts must quote the year rate, for comparison purposes.

refluxer

6 months fixed @ 2% was a decent option when I took one out over 3 months ago but it isn't any more - you can get better rates for half that time now by using a notice account instead, as suggested above.

2.21% for 90 days with OakNorth seems to be the 'sweet spot' in terms of rate vs notice period at the moment. If you open the account and then give notice to close straight away, you're affectively getting a 3 month fix @ 2.21%.

If interest rates continue to increase as they have been doing, then you are also likely to get an even better rate if you then fix for a further 3 months after your notice period is up..