Saving Rates

y3andy

Looking for peoples opinions on saving rates over the next year. Fixed rates and Regular Saver accounts seem to have increased generally in line with the Bank Of England rate increases so far this year. Roughly 2% increases in 1 year fixed rate accounts since this time last year.

Now the predictions at the moment are for the Bank of England base rate to go 5% - 5.5% mid next year...so another 3% on current rates. Do we think it is likely the banks will increase savings in line and we'll see 6 to 6.5% 1 year fixes or will they top out at around 5% maybe?

Trying the best I can, to do a bit of forward planning.

Thank you.

Bigwheels1111

If 5 year fixed hits 5% I’m all in, it will provide me a nice income and no tax to pay as a low earner.
I hope to see 5%, the next 2 boe rises will be telling.

steampowered

Bigwheels1111 said:

If 5 year fixed hits 5% I’m all in, it will provide me a nice income and no tax to pay as a low earner.

If your interest rate is 5% and inflation is 5%, you are not getting an income. You are just breaking even.

The effect is the same as starting with £100 and withdrawing 5% per year, in a low interest rate environment - such as what we had the last 10 years.

Daliah

y3andy said:

Trying the best I can, to do a bit of forward planning.

Good luck.

PawelK

steampowered said:

Bigwheels1111 said:

If 5 year fixed hits 5% I’m all in, it will provide me a nice income and no tax to pay as a low earner.

If your interest rate is 5% and inflation is 5%, you are not getting an income. You are just breaking even.

The effect is the same as starting with £100 and withdrawing 5% per year, in a low interest rate environment - such as what we had the last 10 years.

Not necessarily. If someone else covers the cost of products or services affected by inflation, the person in this post will be still increasing their cash wealth and of invested in something else, it may increase their asset. Inflation rate is not the same for everyone.

Bigwheels1111

steampowered said:

Bigwheels1111 said:

If 5 year fixed hits 5% I’m all in, it will provide me a nice income and no tax to pay as a low earner.

If your interest rate is 5% and inflation is 5%, you are not getting an income. You are just breaking even.

The effect is the same as starting with £100 and withdrawing 5% per year, in a low interest rate environment - such as what we had the last 10 years.

I will get an income without touching my savings.
I start with X
After 5 years I will still have X plus any leftover from annual payout.

Millyonare

It has already been possible to get a 5% savings rate, via Natiownide or YBS, since Q3 2022. My guess is that we will see a (limited) 6-7% deal some time between Q4 2022 and Q1 2023.

Dyor, etc.

steampowered

Bigwheels1111 said:

I will get an income without touching my savings.
I start with X
After 5 years I will still have X plus any leftover from annual payout.

After 5 years, your X won't be worth X anymore.

MisterMotivated

steampowered said:

Bigwheels1111 said:

I will get an income without touching my savings.
I start with X
After 5 years I will still have X plus any leftover from annual payout.

After 5 years, your X won't be worth X anymore.

£X will still be worth £X, regardless of what various items cost at any given time

Albermarle

y3andy said:

Looking for peoples opinions on saving rates over the next year. Fixed rates and Regular Saver accounts seem to have increased generally in line with the Bank Of England rate increases so far this year. Roughly 2% increases in 1 year fixed rate accounts since this time last year.

Now the predictions at the moment are for the Bank of England base rate to go 5% - 5.5% mid next year...so another 3% on current rates. Do we think it is likely the banks will increase savings in line and we'll see 6 to 6.5% 1 year fixes or will they top out at around 5% maybe?

Trying the best I can, to do a bit of forward planning.

Thank you.

Even if Bof E goes to 5% next year, then a one year fix then will take account of the fact that the prediction is that interest rates will start to drop again from that peak. It could be that a 5 year fix will be lower than a one year fix at that time for example. Maybe the best time to fix will be not just yet but before the end of the year, when there will still be some expectations of rising rates.

fearbeag

It is difficult to know when to "dive in" and put a large amount  of money into a fixed savings account. As the rates are expected to rise considerably over the next six months it is a real quandary whether to keep your money in an instant access account  paying relatively low interest and the "right time" to lock it away. One solution is to put a lump sum into one of the many 90 day/ 120 day notice accounts available paying good rates of interest and immediately give notice to withdraw which will be in say 3 months or 4 months time. If interest rates have moved on, you've got access to your money in a relatively short space of time. if interest rates have not moved upwards and you're happy to keep it there, simply cancel your notice to withdraw which you can usually do up to 2 days before the withdrawal date and once again, give a new notice to withdraw for 90 days / 120 days further down the line.