Opinions on savings rates

richpoortyke

I'm just looking at ISA rates and savings rates. Considering locking into a fixed rate ISA for the bulk of my savings but would like to have a flexible ISA or savings account with a decent rate. Mine are now only 3 percent on the ISA n 2 percent on the savings. Just wondering whether to hold fire to shift the money or move it now. The predictions are mortgage rates will increase so that usually means savings rates do too so obviously if I lock in at 4 to 4.5 percent on fixed ISA which seems to be the typical going rate at the moment I could lose out. Any thoughts anyone ?

Middle_of_the_Road

Similar topic here-

https://forums.moneysavingexpert.com/discussion/6660769/holding-off-investing-in-fixed-terms

SnowMan

You can check the market's view of future interest rates in the short term from the overnight index swaps (OIS) spot rates.

These can be accessed from the following page, choose 'latest yield curve data' and then pick the OIS daily data current month spreadsheet, and go to the spot short end sheet and look at the latest date (currently 20th March)

https://www.bankofengland.co.uk/statistics/yield-curves

Spot rate for a given term is equivalent to the average interest rate over that term

At term 1 month the OIS rate is 3.73% (which as we would expect is very close to current base rate of 3.75%) at term 1 year it is 4.31%, at term 2 years it is 4.4% and at term 3 years it is 4.35% and at term 5 years it is 4.29%.

So you need to achieve above these rates with a fixed rate account to beat base rate (based on expectations, reality can be significantly different of course)

There is sometimes a lag between higher interest rate expectations (as has happened in the past number of weeks) being fully represented in available fixed rates offered. So hard to say if current rates will increase if interest rate expectations don't change. But also current interest rate expectations will change depending on world events which will affect rates offered.

Note the forward short term rates in that spreadsheet also give an indication of interest rates at points in time. The 9 month rate of 4.59% (vs 1 month rate of 3.77%) indicates the market currently expects about three 0.25% increases in base rate over the rest of this calendar year.

Albermarle

https://forums.moneysavingexpert.com/discussion/6661014/opinions-on-savings-rates

On the other hand by staying in products that are only paying 2 or 3 % you are guaranteed to be losing out.

nbrewitt

As an example, an Atom Bank 1yr fixed rate was offering 4.25 yesterday which has gone to 4.35 this morning. Things are certainly very fluid at the moment, its anyone's guess but I would be very surprised if there were any reductions in rates in the near future.

fuzzzzy

I have a fixed rate account maturing in early May. I am anticipating keeping the maturing funds in easy access for a while as it looks more likely rates will be rising. I'm having a bit of fixer's remorse at the moment over fixes made earlier this year when it looked like rates were definitely going down.

dosh37

Mortgage lenders immediately increase rates whenever there's a hint of truble at t'mill while savings rates remain static for weeks.

cricidmuslibale

I’m more than a little surprised that NS&I is still going ahead with the prize fund interest rate cut from 3.60% to 3.30% on Premium Bonds from this April’s draw onwards, given that this cut was first announced back on 24 February, four days before the war in Iran began, at a time when the Bank of England was predicted to make up to three 0.25% base rate cuts during 2026 by many financial experts.

That is certainly not the case anymore!

Assuming this imminent Premium Bond interest rate cut does still take place, I would very much hope that NS&I effectively reverse it within a few months because (a) it’s neither justifiable nor necessary anymore in the current circumstances and (b) they surely must be aware that many Premium Bond holders use Premium Bonds mainly as a tax exempt savings product with the relatively frequent lower value prizes substituting for interest payments rather than in the faint hope, despite the overwhelming odds against this, of being lucky enough to win one of the very few high value prizes.

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/81935943#Comment_81935943

I was thinking similar - I guess it'll be up to funding levels: if enough people withdraw then they'll have to adjust the rate again to meet their quotas, especially since other borrowing is so expensive at the moment (when TG27 hit 4.5% I thought this ain't bad for 16 months..)

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81935943#Comment_81935943

There is the possibility that if the current problems push us into recession, that would actually deter the BoE from putting up interest rates.

Vitor

Instead of guessing direction, people typically hedge:

• Lock some money into fixed rates now (certainty)
• Keep some in easy access (optionality)

Mine are now only 3 percent on the ISA n 2 percent on the savings - Easy to do better just by moving providers without any lock in.