12 month bond - was it a mistake?

tawse57

I took out a 12 month bond with the Co-op at the end of last month and also moved my ISAs to the lloyds/TSB 12 month fixed ISA.

I did so assuming the IRs were going to go down amidst all the talk of the BOE lowering IRs. However, although the BOE have reduced IRs, it now looks as if savings rates are on the up because the banks need cash and do not like the terms of the BOE bailout. At the same time there is much talk of real inflation now and the Media is full of the RPI figure rather than the CPI one.

Just wondering what posters views are on here about all of this and whether it was a wise move or not to fix? The ISA, being tax free, seems safe but I am wondering about the 12 month Co-op bond now. Has anyone else here had second thought on fixing for 12 months?

bristolleedsfan

tawse57 wrote: »

I Just wondering what posters views are on here about all of this and whether it was a wise move or not to fix? The ISA, being tax free, seems safe but I am wondering about the 12 month Co-op bond now. Has anyone else here had second thought on fixing for 12 months?

U basically pay your money and make your choice, Co-op One Year Fix wasnt the highest rate on offer at the time anyway was it. :huh:

jonesMUFCforever

I think you will have to stick with it.
You have made your choice and in the case of the bond it would be costly to unwind it now.
If you take any money out of the LTSB FRISA then you lose 90 days interest on the whole balance.

tawse57

Actually, the Co-Op was the third highest at the time I opened. The other two being an Indian and Icelandic bank and I personally prefer to keep my cash in UK companies.

Iwas not thinking of taking the money out - although I would only lose a month's interest now if I did - but was more thinking about MSE posters's views on interest rates and where they might be going. A month ago it looke like they were going down but it now seems the BOE reducing its rate has no affect.

john_kane_2

sorry to ask this as it's not too relevant, but do you pay tax on the interest from the bond when it matures? if so, could this ever have a bearing on how long to have the bond? say your planning to retire in 2 years, wouldnt it make sense to have a 3 year bond if this meant it would be taxed at a lower rate?

tawse, about your OP question, I too was thinking 'uh oh i really should get these bonds asap before the rate lowers'. i think you made the right decision given the information we all had at the time, what has unfolded has just been unfortunate for those investing in bonds 1-2 months ago.

tawse57

Nah John, do pay tax as I am 20 years from retiring.

Yep, at the time all the information was that fixing for 12 months looked best but the whole system has just been turned on its head. The BOE reduction now seems to have no bearing on what the banks do and as they need cash they are pushing up the rates. It seems to be very much up in the air. 12 months from now fixing in the last month might seem the best thing.

Then again, perhaps we need to discuss this and maybe, just maybe, the option is to forefeit that month's interest, get the money out now and... well, interesting times (no pun intended)

Mikeyorks

tawse57 wrote: »

Has anyone else here had second thought on fixing for 12 months?

Not really .... you can finish chasing shadows if you're not careful. You have to bite the bullet sometime and go for whatever is best at that time. And I just can't be bothered chasing a tenth of a % through easy access accounts.

I've just had a 9 month one mature today (6.45%) ..... but the same provider is currently offering 6.7% for the same deal! But I have a further deposit sitting at just under 7% ... for the next year. So I tend to make the choice ... then stop worrying about it.

If your Co-Op is in the 6.5% region ..... then you're in the winning frame? But apologies if it isn't:o

nilrem_2

tawse57 wrote: »

Just wondering what posters views are on here about all of this and whether it was a wise move or not to fix? The ISA, being tax free, seems safe but I am wondering about the 12 month Co-op bond now. Has anyone else here had second thought on fixing for 12 months?

It was a wise move at the time and IMHO it is still a good rate, I took out the same bond myself and am very happy with it, it is still a very good rate, I have been going for fixed rate bonds for many years and it is always difficult to know what rates will do, sometimes you find that rates go up and you are stuck with a lower rate other times you can do really well by fixing.

IMHO it's best to buy a bond then forget about it till the time is ready for it to mature, if you are going to worry after buying that you may be losing out then maybe fixed rates are not the best thing for you.

Console yourself that the Co-op bond is paying a good rate compared to many other savings accounts and certainly better than many variable saving products, yes savings rates may go up but equally they could go down either way you will be getting a good rate.

zzzLazyDaisy

I took the coop one and am happy with it. I prefer buidling societies to banks, as I think they tend to be more conservative than banks and have (generally) weathered the credit crisis better. I know the COOP isn't a BS but it doesn't have shareholders so there are similarities. You pays your money and takes your choice!

bristolleedsfan

zzzLazyDaisy wrote: »

You pays your money and takes your choice!

:T .........

Hungerdunger

john_kane wrote: »

do you pay tax on the interest from the bond when it matures? if so, could this ever have a bearing on how long to have the bond? say your planning to retire in 2 years, wouldnt it make sense to have a 3 year bond if this meant it would be taxed at a lower rate?

I don't know if this applies to all savings bonds, but with the three 2-year bonds I hold, they all pay interest (taxed at 20%) after about one year, and then again on maturity. I'm not aware of any that don't pay anything out until maturity.