Have UK savings rates peaked in Oct 2022?

t1redmonkey

You can just open a longer fixed term bond to hedge your bets.  You'll usually have a few weeks to decide whether to fund it, and in the meantime can see if any better rates come along.

Albermarle

t1redmonkey said:

You can just open a longer fixed term bond to hedge your bets.  You'll usually have a few weeks to decide whether to fund it, and in the meantime can see if any better rates come along.

Usually only two weeks .

t1redmonkey

Albermarle said:

t1redmonkey said:

You can just open a longer fixed term bond to hedge your bets.  You'll usually have a few weeks to decide whether to fund it, and in the meantime can see if any better rates come along.

Usually only two weeks .

Gatehouse give you 30 days, so I've done this with them in the last couple of days, gives me until the end of November to decide whether to fund them or not

Expotter

Have fixed rate deals peaked already? Is now the time to fix?

From today's Telegraph, where it's also reported that mortgage rates have also fallen for the first time since the start of September, reflecting a dip in gilt yields and interest rate expectations.

Top savings rates start to disappear as calm returns

• The Sunday Telegraph
• 23 Oct 2022
• Alexa Phillips

Savers are being urged to grab deals with high rates before they disappear as market chaos cools.

Experts have warned that rates on savings bonds could be peaking, with many of the most attractive deals taken off the market after they became oversubscribed.

Returns on fixed-rate bonds soared after the mini-Budget, reflecting a jump in yields on government bonds known as gilts. But since Liz Truss’s resignation as prime minister and Chancellor Jeremy Hunt’s reversal of her tax cuts, gilt yields have fallen and are now lower than they were earlier in the month.

This could reduce savings rates offered by banks, said Kay Neufeld of the Centre for Business & Economics Research, a think tank.

“If the interest rates on gilts fall, the margin for banks gets smaller and they then eventually have to reduce the interest rates that they offer on savings bonds,” he said.

The top rates on some bonds have already declined after banks withdrew those with the best rates because they became oversubscribed.

In the days following the miniBudget, disappearing deals were quickly being replaced by new ones at even higher rates. But there are now signs that this is starting to slow down as market chaos cools.

The highest rate on a one-year bond was 4.75pc on Tuesday but had dropped to 4.6pc on Friday, according to Defaqto, an analyst.

The 4.75pc bond was available to savers for only two hours before it became oversubscribed. A second bond launched at the same rate later in the day disappeared in a matter of hours, according to Savings Champion, another analyst.

The top rate on a two-year bond was 4.77pc on Friday, down from 5pc on Wednesday, Defaqto said.

Anna Bowes of Savings Champion said: “We could see rates peaking. These really good deals have come and gone quickly, and now we have seen that there have been some that are no longer as high as they were earlier in the week.

“If you see a fixed-rate bond and you’re happy with the return it’s going to give you, you probably want to get on it.”

Katie Brain of Defaqto said that if savers spotted a bond that offered a high rate, they “may want to act quickly, as it may not be around for long”.

GDB2222

Does it matter whether you get 4.5% or 4.7% when inflation is well over 10%? It’s still a very hefty negative real rate.

Trynsave2

GDB2222 said:

Does it matter whether you get 4.5% or 4.7% when inflation is well over 10%? It’s still a very hefty negative real rate.

Agreed, but I'd still rather be getting the 4.7%

GDB2222

Trynsave2 said:

GDB2222 said:

Does it matter whether you get 4.5% or 4.7% when inflation is well over 10%? It’s still a very hefty negative real rate.

Agreed, but I'd still rather be getting the 4.7%

To be honest, I really don’t know what to invest in right now. This feels a bit like the oil price shock of the 1970s, when inflation reached 25%.

masonic

GDB2222 said:

Does it matter whether you get 4.5% or 4.7% when inflation is well over 10%? It’s still a very hefty negative real rate.

GDB2222 said:

Trynsave2 said:

GDB2222 said:

Does it matter whether you get 4.5% or 4.7% when inflation is well over 10%? It’s still a very hefty negative real rate.

Agreed, but I'd still rather be getting the 4.7%

To be honest, I really don’t know what to invest in right now. This feels a bit like the oil price shock of the 1970s, when inflation reached 25%.

It may be better to take a longer term view. RPI is currently at 347.6 and 10 years ago was at 244.2. That equates to an 10 year annualised inflation rate of 3.6%. Many investments have outperformed this over a 10 year period. Cash savings probably haven't, but inflation is normally a problem over the long term for those holding cash. We've had a long period of low inflation following the global financial crisis, and we are seeing a reversion to the mean. High inflation may be with us in the months to come, but quite likely the average over the next decade will not be above the returns of traditional investments. Investing in any asset class (including cash) inevitably involves short term periods of negative real returns.

If you take a more pessimistic view of inflation than the above, then you can buy individual index linked gilts and hold to maturity to receive a guaranteed slightly above inflation return.

GDB2222

"If you take a more pessimistic view of inflation than the above, then you can buy individual index linked gilts and hold to maturity to receive a guaranteed slightly above inflation return."

I'll be looking at IL gilts, then. When I last looked, they were on a negative real rate of return, and I'm quite chuffed at the thought of a small positive return without risk, if held to maturity. 

lohr500

Despite that Telegraph article, I am still going to sit tight and see what impact the November BoE statement has on rates.
If rates have peaked right now, then it's my loss for delaying, but I still think we will see further increases in the short term.
I am only looking to place savings on a 1 or 2 year horizon.