What can be done with a poor fixed bond?

shadewood_mole

I opened a fixed rate one year bond in April 2022 at what appeared to be a good rate at the time.  Needless to say it is now a very poor rate.

As I understand it, if this had been an ISA, I could move it early (with a penalty) and get a much better deal.

However bonds do not appear to have the same early withdrawal flexibility.

So do I just have to put up with it and wait until it matures in April or is there any other option?

Thanks

phillw

Check the T&C but fixed bonds usually don't have exemptions on the basis that there are better rates available, as that is part of the game.

If market rates dropped and they tried to reduce your fixed rate, then would you allow them to?

InvesterJones

Think yourself lucky it's only until April!

35har1old

Just Depends on the terms of your bond some bonds have a penalty attached (loss of interest for 30 to120 days) or others don't allow a withdrawal at all

Albermarle

35har1old said:

Just Depends on the terms of your bond some bonds have a penalty attached (loss of interest for 30 to120 days) or others don't allow a withdrawal at all

The ones that allow early withdrawal, are very few and far between, if there are still any at all.

dunstonh

As I understand it, if this had been an ISA, I could move it early (with a penalty) and get a much better deal.

Although you would have had a lower interest rate because of that flexibility.

However bonds do not appear to have the same early withdrawal flexibility.

Which is expected with fixed term deposits.   It is the very thing that gets you the fixed rate.

So do I just have to put up with it and wait until it matures in April or is there any other option?

Death is normally the only option with the good ones.  

refluxer

As mentioned above, the overwhelming majority of fixed rate bonds don't allow early access to the money, unless the account holder dies or (with some providers) gets a critical illness or suffers 'financial hardship' (eg. bankruptcy). The only way for you to be sure either way though is to check the T&Cs of your particular account, but I wouldn't get your hopes up.

One notable exception that I'm aware of were the Nationwide's 'Fixed Rate e-bonds' (where you could access the money before maturity subject to a penalty, just like a Fixed Rate ISA) but these haven't been available for a while now and have been replaced by 'Fixed Rate Online Bonds', where early access is not allowed. From memory, the rates for those e-Bonds were generally lower than the competition - I'm a Nationwide customer but never took one out.

FWIW, I've also got a couple of fixed rate accounts that are due to mature in the next few months, who's rates are poor by current standards. One was taken out two years ago when interest rates were (literally) heading to zero and the other was early last year, after rates had started to recover. Both were taken out after a lot of thought and both were the right decision for me at the time - as also said above, it's all part of the game.

Thankfully, I tend to split my savings into chunks so all my eggs aren't in the one basket and, as a consequence of this, I was also able to take advantage of some cracking rates at the end of last year, when some of my other fixed rate accounts matured. It's swings and roundabouts. A 'savings ladder'-type approach (if you don't have one already) with fixed rate accounts taken out at different times of the year (and for different durations) can be a good way of spreading the risk and evening things out.

shadewood_mole

Thanks for your replies. 

Much as expected I'll just have to wait.  I would have put the money into an ISA but had already used my allowance.  As you say it's a good job it's only a one year bond. 

In the current market I would be wary of putting anything in to a fixed account.  I don't think we've reached the peak just yet.

dunstonh

In the current market I would be wary of putting anything in to a fixed account.  I don't think we've reached the peak just yet.

That isn't how fixed term deposits work.

The bank will finance them on the basis of what they think that rates and financing will be over the whole of the term.    So, whilst short term fixed rate deposits may rise a little bit more, longer terms are already falling and a short term rise in interest rates is unlikely to change that.

JGB1955

I feel your pain - I have £68K in a couple of fixed rate bonds with Paragon, currently earning 0.7% and 1.2%.  Am champing at the bit for February to come along!

RG2015

I have the Coventry BS 15 Month Loyalty Fixed Bond 30.04.2023 at 1.35% (Ouch!). When I opened the account on 30/01/2022, the best easy access account was Atom at 0.65%.

It was 28/03/2022 when Chase launched their 1.50% easy access account. At least I had 2 months of the Coventry at a competitive rate.

So I am still stuck at 1.35% in one Coventry account and another Coventry easy access (6 per annum) account at 3.25%.

I also have 5 Ford Money 1 year fixes maturing from November 2023 to January 2024 at 4.45%

It just goes to show the volatility of the last 12 months.