Savings - Stick (at around 2%) or twist (at around 4%)? 29 September 2022 at 11:22AM in Savings & investments 19 replies 2.6K views

What_time_is_it

I've got around £80k in savings which are currently in a mix of instant access, regular savers and 1 year fixes. The average interest rate overall is about 2%.

I'm using the instant access to top up my pension (via salary sacrifice each month, and then topping up my income from my savings). Also need to keep around half the total available for a family emergency at short(ish) notice.

Would you be taking out 1 year fixes on savings accounts at ISAs now? Or sticking to what I've got in the hope that higher rates will be forthcoming? 
And how long would you wait?

ColdIron

This question is asked several times a day just now. Have a read through the other posts. Bottom line - No one can tell you the 'right' answer, you will have to make your own judgement taking into account your own circumstances

jak22

If there's new fixes next week then waiting a week is worthwhile or if you want to put all the money in one go then you might want to wait a longer time or if you want a long fix you also might want to wait until things change

But to maximise income now then if the 1 year fix is 2% above the variable then the variable would have to catch up and then also overtake by that same gap in the year to work out better than the fix which earns a higher rate from day 1

Also taking out new smaller fixes as new good rates appear every few months might help

Expotter

Here an interesting little analysis from thisismoney.co.uk using as a comparison the now gone 4.1% 1 year fix

"For example, were someone to hold £10,000 for six months in an easy-access account paying 2 per cent and then fix, they would need the best fixed deal to be paying almost 6.2 per cent over the next six months to replicate the interest they would have earned in 12 months by opting for the best 4.1 per cent one-year deal now.
Of course, on the flip side, if in two months time the best one-year rate pays 5 per cent, then keeping cash in a 2 per cent easy-access deal for a short period of time could pay off. After two months in an easy-access deal paying 2 per cent followed by the next 10 months in a one-year deal paying 5 per cent, someone will effectively earn £451 in interest. That's £41 more than if they had opted for the best one-year fix right now."

So basically, you'll need to do a few calculations and a lot of guessing about what future interest rates will be to decide when is the best time to fix.

NannaH

I’m going to drip feed £30k (total) in 6 monthly tranches into 1 year fixes.
I’ve just put £10k into YBS easy access at 2.5% , £5k into Investec 1 year fix at 3.9% and will drop £5k x 3 in March, September and March 24, that should give us a decent spread. 

nottsphil

NannaH said:

I’m going to drip feed £30k (total) in 6 monthly tranches into 1 year fixes.
I’ve just put £10k into YBS easy access at 2.5% , £5k into Investec 1 year fix at 3.9% and will drop £5k x 3 in March, September and March 24, that should give us a decent spread. 

Isn't that second YBS £5000 only earning 2%, so equivalent to to 2.25% overall? 

mebu60

nottsphil said:

NannaH said:

I’m going to drip feed £30k (total) in 6 monthly tranches into 1 year fixes.
I’ve just put £10k into YBS easy access at 2.5% , £5k into Investec 1 year fix at 3.9% and will drop £5k x 3 in March, September and March 24, that should give us a decent spread. 

Isn't that second YBS £5000 only earning 2%, so equivalent to to 2.25% overall? 

Not if it is in the Loyalty Six Access eSaver. 

But that would be the case if it was in the Online Rainy Day Account Issue 2. 

Bigwheels1111

Al Ryan 2.35% easy access, looks like Gatehouse might be upping their rate also 2.0% today not sure tomorrow.

cricidmuslibale

I fully realise that the world of saving money is never going to be ideal but wouldn't it be lovely if the two Yorkshire BS accounts presently paying 2.5% interest, albeit only up to £5000 in the case of the Rainy Day A/c, had a monthly interest option too! Because neither of them does monthly interest, those of us that partly or fully rely on savings for regular income may well feel that we have to stick with a slightly lower interest-paying easy or limited access account that does have the option of paying interest monthly as well as annually!

justwantedtosay

It's one of those questions that can only be answered in hindsight. I recently rushed into a 1 year fix at 2.7% which seemed wonderful after all these years of 0.5% but am already regretting it. I'm lucky that my building society is paying 2.25% on a limited access ISA and I'm holding on with that until rates go up further, and I think they will rise significantly before the end of the year, but most of my savings is in fixes of 1.25% to 2.6% [mostly over 2% fortunately] and by chance most will mature late next year. I'm hoping that will match the peak in rates and I'll take long term fixes then. I suspect the peak will come sooner though and, though nobody knows what will happen, I'd be thinking of fixing early next year if the funds were available. If I were going to fix for a one year term I certainly wouldn't wait longer than that, and if rates do up as far and as fast as is being suggested I'd certainly give a lot of thought to fixing for longer as I think there's a good chance offers will be worse in 18 months' time. It's frustrating sitting on a 1.25% fix for the next year and a half, but pleasing to have had money at 2.7% over the last couple of years. You just have to hope it all balances out.

cricidmuslibale

justwantedtosay said:

It's one of those questions that can only be answered in hindsight. I recently rushed into a 1 year fix at 2.7% which seemed wonderful after all these years of 0.5% but am already regretting it. I'm lucky that my building society is paying 2.25% on a limited access ISA and I'm holding on with that until rates go up further, and I think they will rise significantly before the end of the year, but most of my savings is in fixes of 1.25% to 2.6% [mostly over 2% fortunately] and by chance most will mature late next year. I'm hoping that will match the peak in rates and I'll take long term fixes then. I suspect the peak will come sooner though and, though nobody knows what will happen, I'd be thinking of fixing early next year if the funds were available. If I were going to fix for a one year term I certainly wouldn't wait longer than that, and if rates do up as far and as fast as is being suggested I'd certainly give a lot of thought to fixing for longer as I think there's a good chance offers will be worse in 18 months' time. It's frustrating sitting on a 1.25% fix for the next year and a half, but pleasing to have had money at 2.7% over the last couple of years. You just have to hope it all balances out.

I wonder if that was the same 1 year fix I rushed into c.3 months ago (a Coventry Building Society Loyalty Bond Issue 3) which I also thought wonderful at the time but now rather wish I hadn't been seduced into putting money into! Having said all that, to be fair to this Coventry Bond, it has paid considerably more than the best available easy access account for the last 3 months or so, and it probably will at least match the best available easy access account until shortly before or after the next B of E base rate rise. So at least for 4 months of its 13 and half month existence it has been a very decent account to save into!