To fix or not to fix?

Interest rates offered by Bank and Building Societies remain stubbornly low. This week’s statement from Mark Carney at The Bank of England just reinforced the likelihood of the Bank base rate remaining at just 0.5% until next year.

Most of our clients hold one or more savings accounts and the best rates on offer for intant access accounts remain at 1.5%pa at best and often considerably lower. With income tax and inflation, this means cash on deposit is often losing value in real terms. Clearly if you are a taxpayer and you have not used you 2013/14 ISA allowance, it makes sense to consider using your £5760 Cash ISA allowance.

You can obtain better rates by fixing your rate for a set term. These accounts available from Banks and Building Societies are often referred to as Fixed Rate Bonds. The best rates I can find today are as follows;

1.9% pa – 1 Year

2.5% pa – 2 Years

2.7% pa – 3 Years

3.25% pa – 5 Years

While the rates available get higher the longer you fix, there is a danger that if you fix for 5 years, say, interest rates may rise in general leaving you with an uncompetitive deal.

If you wish to discuss deposit accounts with your adviser, do get in touch with us and we will do our best to help.

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