Should I wait for a rate rise?

aerofly
aerofly Posts: 14 Forumite
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in Savings & investments
I’ve just had a large fixed rate bond mature, and I’m looking to reinvest.
I heard today (18th Apr) that we may get an interest rate rise next month. Is it worth waiting for a month or so or do you think the rise will be small enough not to wait for?

Thanks. Steve
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Comments

  • veryintrigued
    veryintrigued Posts: 3,843 Forumite
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    The latest inflation figures may have just dampened the desire for that rate hike.
  • Flobberchops
    Flobberchops Posts: 1,279 Forumite
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    Invest half now and the other half in six months, maybe?

    If it was me I would let the bond roll over straight away. Nothing is guaranteed and the time spent uninvested is opportunity cost.
    : )
  • Peelerfart
    Peelerfart Posts: 2,177 Forumite
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    If it does move, up by 0.25% is the most it will move, most say.
    Is this enough to influence your choice?
    Space available for rent
  • Steve_xx
    Steve_xx Posts: 6,976 Forumite
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    It's a hard decision.

    If there is a hike it would likely be 0.25%, but that would not necessarily translate in a similar amount of hike on savers rates. The banks seem convinced that rates to mortgagees are staying low, and therefore any chance to increase their profit will come from having as wider spread as possible between mortgage rates and savers rates. They may tweak rates upwards, but maybe not by a full 0.25%.

    That said, of late there has been some slight lifting of rates for savers, in particular with the online newbie banks. So that is heartening.

    On other hand, and in spite the newbie banks generally offering better rates for savers, the established banks like BoS and Lloyds have announced that they are cutting rates on their currents accounts by as much as 0.50%. That is worrying given that there has (a) been no rate rise as yet, and (b) that any rate rise coming next month would likely be only half of what BoS/Lloyds plan to reduce their by!
  • OldMusicGuy
    OldMusicGuy Posts: 1,756 Forumite
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    I'm waiting. I am about to lock in a significant amount of money in fixed rate bonds. For me, the amount is significant enough to wait a bit before committing to investments for periods of one year or more.

    I was disappointed to see the news yesterday that a rate rise may be less likely, so if rates don't go up I will probably stick to 1 and 2 year bonds rather than go three years or longer. If they don;t go up in May they are likely to go up within the next 12 months IMO.
  • Paul_DNAP
    Paul_DNAP Posts: 751 Forumite
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    edited 19 April 2018 at 1:55PM
    With so many people on fixed-rate fixed-term mortgages it may be a while before the banks/BS can pass on any rate rise to retail customers for mortgages, and they need to do that before they can think about passing it on to saver's rates.

    So my feeling is that rates will not be moving upwards soon, and not moving fast when they do, so another 1yr or 2yr fix should bump it forward to when the rates are slightly better, and what you lose having cash in an instant access account for the short term will cost you more than any small rate rise in the near future will earn you.


    If by any chance the rates do rocket up by 3% or more, then it may be worth swallowing the penalty for breaking the fixed rate account for a new one.

    (Although I could be wrong, I often am.)
    (Although I could be wrong, I often am.)
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    You could try "laddering" - invest one third in a three year fix, one third in a two year fix, and one third in a one year fix. Then as each matures invest it in a three year fix until you need the money for spending, or choose to invest instead of staying in cash. Or you could be daring and put one quarter into, say, gold sovereigns, and one quarter into each of one, two, and three year fixes.
    Free the dunston one next time too.
  • OldMusicGuy
    OldMusicGuy Posts: 1,756 Forumite
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    I'm planning on setting up a bond ladder which is why I'm going to wait until May to see what happens (if anything). It's all sat in a Ford Money account earning 1.22% at the moment.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Paul_DNAP wrote: »
    With so many people on fixed-rate fixed-term mortgages it may be a while before the banks/BS can pass on any rate rise to retail customers for mortgages, and they need to do that before they can think about passing it on to saver's rates.

    Relatively little of this mortgage funding came from savers retail deposits. Until it does there'll be little in the way of a savings rate price war to attract funding.
  • Superscrooge
    Superscrooge Posts: 1,171 Forumite
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    Carney now seems to be hinting there might not be an interest rate rise in May

    http://www.bbc.co.uk/news/business-43831159
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