When will interest rates rise?
That's the million dollar question! In June, Bank of England governor Mark Carney hinted that rates may rise, "sooner than markets currently expect."
But he later played down the chances of a rise before the end of the year - and, in their last meeting, every one of the nine members of the Bank of England's Monetary Policy Committee, voted to keep rates on hold at their current level of 0.5%.
What we can be almost certain of however, is that when rates do rise, they won't suddenly shoot up dramatically.
With this in mind, if you are considering a fixed rate savings account, you need to think how long you're comfortable fixing for. For example, think about how you'd feel if you lock in for the long term and can't move your savings if higher returns become available elsewhere.
But he later played down the chances of a rise before the end of the year - and, in their last meeting, every one of the nine members of the Bank of England's Monetary Policy Committee, voted to keep rates on hold at their current level of 0.5%.
What we can be almost certain of however, is that when rates do rise, they won't suddenly shoot up dramatically.
With this in mind, if you are considering a fixed rate savings account, you need to think how long you're comfortable fixing for. For example, think about how you'd feel if you lock in for the long term and can't move your savings if higher returns become available elsewhere.
Short-term fixes
If you think interest rates will go up soon, you should probably stick to a short-term fixed rate account. Then, if you are right, you won't find yourself locked in to a low rate for several years.
Investec offers a market-leading 1 Year Fixed Term Deposit bond paying an annual equivalent rate (AER) of1.95%. But - and it's a big but - you'll only get this rate if you can invest £25,000 or more.
If you don't have that much, BM Savings pays 1.75% AER on its 1 Year bond. And you can invest from £1.
If you're happy to tie up your money for longer than a year, Yorkshire Building Society has just launched an 18-month Fixed Rate Bond and an 18-month Fixed Rate NISA. You need £1,000 to open the bond but only £100 to open the NISA.
Both accounts pay 1.50% AER (though returns with the NISA will be paid tax-free) and mature at the end of January 2016.
You can apply for either account in branches of Yorkshire Building Society, Chelsea Building Society, Norwich & Peterborough Building Society and Barnsley Building Society. The NISA is also available through N&P and the Chelsea online.
If you want to try a longer-term savings deal, there are some competitive two-year accounts on offer too. The Investec 2 Year Term Fixed Deposit and First Save's 2 Year bonds both pay 2.30% AER, for example.
The minimum investment for the First Save bond is £1,000 but, again, you'll need £25,000 to open the Investec account.
Investec offers a market-leading 1 Year Fixed Term Deposit bond paying an annual equivalent rate (AER) of1.95%. But - and it's a big but - you'll only get this rate if you can invest £25,000 or more.
If you don't have that much, BM Savings pays 1.75% AER on its 1 Year bond. And you can invest from £1.
If you're happy to tie up your money for longer than a year, Yorkshire Building Society has just launched an 18-month Fixed Rate Bond and an 18-month Fixed Rate NISA. You need £1,000 to open the bond but only £100 to open the NISA.
Both accounts pay 1.50% AER (though returns with the NISA will be paid tax-free) and mature at the end of January 2016.
You can apply for either account in branches of Yorkshire Building Society, Chelsea Building Society, Norwich & Peterborough Building Society and Barnsley Building Society. The NISA is also available through N&P and the Chelsea online.
If you want to try a longer-term savings deal, there are some competitive two-year accounts on offer too. The Investec 2 Year Term Fixed Deposit and First Save's 2 Year bonds both pay 2.30% AER, for example.
The minimum investment for the First Save bond is £1,000 but, again, you'll need £25,000 to open the Investec account.
Mid-term bonds
If you think there may still be a while before interest rates go up, you might want to lock up your savings for longer.
If you're wrong though, and they go up earlier than you expect, remember you won't be able to move your money to an account paying higher returns.
If you're prepared to accept that risk, then Shawbrook Bank offers a market-leading 2.75% AER on its 3 Year Fixed Rate Bond (Issue 20). You need £5,000 to open this account.
If you don't have this much to invest, Aldermore pays 2.25% AER on its 3 year Fixed Rate Savings Account. You only need £1,000 to apply for this account.
If you're wrong though, and they go up earlier than you expect, remember you won't be able to move your money to an account paying higher returns.
If you're prepared to accept that risk, then Shawbrook Bank offers a market-leading 2.75% AER on its 3 Year Fixed Rate Bond (Issue 20). You need £5,000 to open this account.
If you don't have this much to invest, Aldermore pays 2.25% AER on its 3 year Fixed Rate Savings Account. You only need £1,000 to apply for this account.
Long-term accounts
Even if interest rates do go up soon, any increases are likely to be gradual. So you might still think it's worth grabbing the highest returns from 4 and 5 year fixed accounts now.
The market-leading 4 year account is from Vanquis. It pays a rate of 2.91% AER on a minimum investment of £1,000 with a maximum investment of £250,000.
Vanquis also offers the market-leading 5 year bond. This account pays 3.25% again on a minimum investment of £1,000.
Both Vanquis accounts can only be managed online.
The market-leading 4 year account is from Vanquis. It pays a rate of 2.91% AER on a minimum investment of £1,000 with a maximum investment of £250,000.
Vanquis also offers the market-leading 5 year bond. This account pays 3.25% again on a minimum investment of £1,000.
Both Vanquis accounts can only be managed online.
Protect your returns
If you fancy a compromise, there are fixed term savings accounts which offer a 'lowest guaranteed' return - or returns that rise in line with interest rates.
With Investec's 3 Year Base Rate Plus account for example, you'll earn base rate plus 1% but with a minimum 'floor' of 2.60% AER. In other words, you'll never earn less than 2.60% but if the base rate (currently 0.5%) climbs higher than 1.60% within the next three years, your savings will earn more than 2.60%. You cannot close the account early or withdraw your money during the 3-year term - and it's online-only.
Another option is the Investec 5 Year Step Up Bond. This pays 2.85% AER for the first three years. The rate then increases to 3.85% for the last two years - higher than any of the returns available on any other five-year accounts.
You need £25,000 to open either this or the 3 Year Base Rate Plus account.
source:
http://www.moneysupermarket.com/c/news/should-you-fix-your-savings-rate-now/0037171/
With Investec's 3 Year Base Rate Plus account for example, you'll earn base rate plus 1% but with a minimum 'floor' of 2.60% AER. In other words, you'll never earn less than 2.60% but if the base rate (currently 0.5%) climbs higher than 1.60% within the next three years, your savings will earn more than 2.60%. You cannot close the account early or withdraw your money during the 3-year term - and it's online-only.
Another option is the Investec 5 Year Step Up Bond. This pays 2.85% AER for the first three years. The rate then increases to 3.85% for the last two years - higher than any of the returns available on any other five-year accounts.
You need £25,000 to open either this or the 3 Year Base Rate Plus account.
source:
http://www.moneysupermarket.com/c/news/should-you-fix-your-savings-rate-now/0037171/
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