Question
We usually reinvest our money each year in a oneyear fixed rate interest bond but at the moment they are just 2.75% gross. We have already put in 3 year fixed rate interest bond for 4.40% but wonder if a 18 month bond @ 3.25% is worth considering. Answer
If you haven’t used your cash ISA allowances I’d consider the Santander Flexible ISA. It’s paying 3.2% which includes a guarantee to pay 2.7% above the Bank of England Base Rate for the first 12 months. Interest will be tax-free and you can contribute up to £3,600 per person (£5,100 if age 50 or over) before 6 April and a further £5,100 afterwards (in the 2010/11 tax year). You’ll almost certainly want to more elsewhere in a year’s time when the guarantee ends, but it should prove a good home meanwhile. Alternatively, Halifax is offering 3.5% on its 2 year fixed rate Cash ISA.
If you’re non-taxpayers and/or will exceed the ISA allowances the most competitive one year fixed rate is currently the Post Office at 3.30% gross – the account is provided by the Bank of Ireland. Over two years ICICI Bank tops the fixed rate best buys at 4.1% gross. ICICI is an Indian Bank, but covered by the Financial Services Compensation Scheme up to £50,000 per person.
If you’re taxpayers another option that might appeal is 3 year National Savings Index-Linked Certificates. The current issue pays inflation (measured by the Retail Price Index) plus 1% a year for three years, tax-free. They look especially attractive right now as RPI is 3.7%, but inflation could obviously fall over time, with some predicting it may even become negative. During any periods of negative inflation the return will simply be 1%.
My gut feeling is that interest rates will remain low for a while yet. Inflation may recede by year and there’s pressure on the Bank of England not to raise rates as doing so could hinder economic recovery. However, if there’s one thing I’ve learned over the last few years - it’s never say never!
We usually reinvest our money each year in a oneyear fixed rate interest bond but at the moment they are just 2.75% gross. We have already put in 3 year fixed rate interest bond for 4.40% but wonder if a 18 month bond @ 3.25% is worth considering. Answer
If you haven’t used your cash ISA allowances I’d consider the Santander Flexible ISA. It’s paying 3.2% which includes a guarantee to pay 2.7% above the Bank of England Base Rate for the first 12 months. Interest will be tax-free and you can contribute up to £3,600 per person (£5,100 if age 50 or over) before 6 April and a further £5,100 afterwards (in the 2010/11 tax year). You’ll almost certainly want to more elsewhere in a year’s time when the guarantee ends, but it should prove a good home meanwhile. Alternatively, Halifax is offering 3.5% on its 2 year fixed rate Cash ISA.
If you’re non-taxpayers and/or will exceed the ISA allowances the most competitive one year fixed rate is currently the Post Office at 3.30% gross – the account is provided by the Bank of Ireland. Over two years ICICI Bank tops the fixed rate best buys at 4.1% gross. ICICI is an Indian Bank, but covered by the Financial Services Compensation Scheme up to £50,000 per person.
If you’re taxpayers another option that might appeal is 3 year National Savings Index-Linked Certificates. The current issue pays inflation (measured by the Retail Price Index) plus 1% a year for three years, tax-free. They look especially attractive right now as RPI is 3.7%, but inflation could obviously fall over time, with some predicting it may even become negative. During any periods of negative inflation the return will simply be 1%.
My gut feeling is that interest rates will remain low for a while yet. Inflation may recede by year and there’s pressure on the Bank of England not to raise rates as doing so could hinder economic recovery. However, if there’s one thing I’ve learned over the last few years - it’s never say never!
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