Fixed savings maturing - How long to re-fix for?

SickGroove

Evening,

I've currently got 80K in a 1 year fix maturing next month...

I will be fixing again but unsure if I should go for 1,2,3,4 or 5 year fix. I don't need access to the money at the moment and as rates are predicted to drop late 2023, not sure whether fix again now or stick it in an easy access account. I've maxed out my isa for this year and will be maxing out next year's isa in April.

Any advice appreciated.

Cheers!

cricidmuslibale

How about putting £16k (= £80k / 5) into one fix for each term length using the most competitive interest rate accounts that suit you; in other words, one 1 year fix, one 2 year fix, one 3 year fix, one 4 year fix and one 5 year fix, all paying the highest or close to the highest available interest rates at present.

By doing this you can build up a ladder of fixed term accounts that mature in successive years and thus provide you with some regular annual income that you can depend on.

As far as the interest from your present £80k fix is concerned, my advice would be to put that in the highest paying easy access account that you’re comfortable with, for use as emergency savings. If you choose an account paying monthly interest this will give you a little bit of reliable monthly income should you need to use it, but you will also have the option of leaving the interest in the account to compound, with your account balance thus growing after every month in which the interest remains in the account.

SickGroove

cricidmuslibale said:

How about putting £16k (= £80k / 5) into one fix for each term length using the most competitive interest rate accounts that suit you; in other words, one 1 year fix, one 2 year fix, one 3 year fix, one 4 year fix and one 5 year fix, all paying the highest or close to the highest available interest rates at present.

By doing this you can build up a ladder of fixed term accounts that mature in successive years and thus provide you with some regular annual income that you can depend on.

As far as the interest from your present £80k fix is concerned, my advice would be to put that in the highest paying easy access account that you’re comfortable with, for use as emergency savings. If you choose an account paying monthly interest this will give you a little bit of reliable monthly income should you need to use it, but you will also have the option of leaving the interest in the account to compound with your account balance thus growing after every month in which the interest remains in the account.

Thanks for the advice, so could you say open a 1,2,3,4 & 5 year fix with the same provider (if all had the highest current rates)...obviously making sure the total funds don't exceed £85K? I would be having the interest paid away monthly for all fixed accounts taken out btw

Aristotle67

Laddering is a good suggestion and is what I would do in your position. It was recommended to me by an established and reliable forumite and I have not regretted this approach. I have a considerable amount of savings spread over accounts ranging from 1 to 5 years, but always with no more than £85,000 across linked providers. You could open the fixes suggested with the same provider if you wished. 

I am no expert, but my feeling is that rates on longer term fixes are not going to increase over the coming months as interest rates are not expected to rise significantly. Shorter time fixes might in response to any increase in the BoE base rate. We will find out this week how much any increase in base rate will be though it is expected to remain at 4.0% so perhaps there will be no immediate increase in short-term rates. 

Laddering will serve you well by locking in good long term rates in response to future interest rate falls, but also allowing you to take advantage of any increase in rates at the time when your lowest fixed term matures. 

cricidmuslibale

You’re very welcome - yes, if you wish to do so, you could open a 1, 2, 3, 4 & 5 year fix with the same provider, especially if it is paying the highest interest rate for each term length!

You’re definitely doing the sensible and correct thing by ensuring that the total amount of money saved with any one savings provider (other than NS&I) is no more than £85k; do be careful also to check that this £85k is not shared with another closely related savings institution that you may already have a substantial amount of savings with: e.g. Yorkshire Building Society shares its £85k FSCS limit with Chelsea Building Society and also used to share it with Egg savings accounts which later became YBS accounts.

Having your interest paid away monthly for all fixed accounts that you take out is likely to help you stay within the £85k limit more easily, as you then only need to keep an eye on the total amount of capital that you first put into these fixed term accounts!

SickGroove

Aristotle67 said:

Laddering is a good suggestion and is what I would do in your position. It was recommended to me by an established and reliable forumite and I have not regretted this approach. I have a considerable amount of savings spread over accounts ranging from 1 to 5 years, but always with no more than £85,000 across linked providers. You could open the fixes suggested with the same provider if you wished. 

I am no expert, but my feeling is that rates on longer term fixes are not going to increase over the coming months as interest rates are not expected to rise significantly. Shorter time fixes might in response to any increase in the BoE base rate. We will find out this week how much any increase in base rate will be though it is expected to remain at 4.0% so perhaps there will be no immediate increase in short-term rates. 

Laddering will serve you well by locking in good long term rates in response to future interest rate falls, but also allowing you to take advantage of any increase in rates at the time when your lowest fixed term matures. 

So, if I did the 5 year laddering option, once the first year one matures would I put that back into a new 5 year fixed, so the process starts a again then the same every year ie always put the maturing fix back into 5 year fixes as each year matures?

Also, I suppose I could do this ladder for 1,2,3 or 1,2,3,4 years if I didn't want to fix for 5 years? 

Thanks for your help so far

cricidmuslibale

SickGroove said:

Aristotle67 said:

Laddering is a good suggestion and is what I would do in your position. It was recommended to me by an established and reliable forumite and I have not regretted this approach. I have a considerable amount of savings spread over accounts ranging from 1 to 5 years, but always with no more than £85,000 across linked providers. You could open the fixes suggested with the same provider if you wished. 

I am no expert, but my feeling is that rates on longer term fixes are not going to increase over the coming months as interest rates are not expected to rise significantly. Shorter time fixes might in response to any increase in the BoE base rate. We will find out this week how much any increase in base rate will be though it is expected to remain at 4.0% so perhaps there will be no immediate increase in short-term rates. 

Laddering will serve you well by locking in good long term rates in response to future interest rate falls, but also allowing you to take advantage of any increase in rates at the time when your lowest fixed term matures. 

So, if I did the 5 year laddering option, once the first year one matures would I put that back into a new 5 year fixed, so the process starts a again then the same every year ie always put the maturing fix back into 5 year fixes as each year matures?

Also, I suppose I could do this ladder for 1,2,3 or 1,2,3,4 years if I didn't want to fix for 5 years? 

Thanks for your help so far

@SickGroove Yes is the answer I would give without any hesitation at all to both your questions above.

Aristotle67

cricidmuslibale said:

SickGroove said:

Aristotle67 said:

Laddering is a good suggestion and is what I would do in your position. It was recommended to me by an established and reliable forumite and I have not regretted this approach. I have a considerable amount of savings spread over accounts ranging from 1 to 5 years, but always with no more than £85,000 across linked providers. You could open the fixes suggested with the same provider if you wished. 

I am no expert, but my feeling is that rates on longer term fixes are not going to increase over the coming months as interest rates are not expected to rise significantly. Shorter time fixes might in response to any increase in the BoE base rate. We will find out this week how much any increase in base rate will be though it is expected to remain at 4.0% so perhaps there will be no immediate increase in short-term rates. 

Laddering will serve you well by locking in good long term rates in response to future interest rate falls, but also allowing you to take advantage of any increase in rates at the time when your lowest fixed term matures. 

So, if I did the 5 year laddering option, once the first year one matures would I put that back into a new 5 year fixed, so the process starts a again then the same every year ie always put the maturing fix back into 5 year fixes as each year matures?

Also, I suppose I could do this ladder for 1,2,3 or 1,2,3,4 years if I didn't want to fix for 5 years? 

Thanks for your help so far

@SickGroove Yes is the answer I would give without any hesitation at all to both your questions above.

As I believe you might hear on a certain tv programme, "it's a yes from me, too!" 

DoneWorking

What happens if OP does a ladder with one bank and it is subsequently taken over by another bank he also saves with 
Surely this would affect his £85k protection 

Albermarle

DoneWorking said:

What happens if OP does a ladder with one bank and it is subsequently taken over by another bank he also saves with 
Surely this would affect his £85k protection 

It would, but you can not plan based on 'what ifs' . In any case what alternative do you have, apart from only saving with NS & I ?

SickGroove

DoneWorking said:

What happens if OP does a ladder with one bank and it is subsequently taken over by another bank he also saves with 
Surely this would affect his £85k protection 

Good point, although I'll only have a max of £85k split over either 1,2,3,4 or 5 year ladder / 1,2 3, or 4 year ladder / 1,2 or 3 year ladder with all interest being paid away monthly so this shouldn't effect me.