Interest rate rises and savings accounts

[Ecosseven]

Afternoon all,

I've got some cash in an easy access savings account and have benefited from the increases in interest rate over the last few months. I was thinking about opening a 12 month fixed rate to get a better rate. Nationwide Building Society are currently offering 4%.

Do you think it's worth holding off until after the next interest rate review in early November? If the base rate increases by say 0.5% then hopefully the market will increase 12 month fixed rate bonds, although probably not by the same amount.

I've used this years ISA allowance and am a higher rate tax payer so any interest above £500 will get taxed at my marginal rate of 41% (Scottish resident).

Thanks in advance.

[OutInTheShed]

Personally, yes, I'm holding off, but then I prefer not to go for 1 year bonds because I'm considering a few shares for the medium term.

I think further rates rises are pretty much a done deal, the soundtrack from every central bank around the globe is fairly persuasive.

[type-r]

I'm holding off too. Everyday it seems the 1yr fixed is creeping up. Today the highest offered is 4.35%.

Expecting another BoE base rate rise... which should see retail rates for 1yr fixed go up even further.

Some talk about rates continuing to rise until back end of 2023... so question is timing - when to go all in and still take advantage of next years potentially higher rates. Will assess after next BoE meeting announcement.

[cliffords]

I have been looking today. Where did you see that rate ? Thanks

[PositronicRay]

Coventry building society are offering 4.4% 12 month fix.

[type-r]

cliffords said:

I have been looking today. Where did you see that rate ? Thanks

Has gone up even further since this morning.

Now highest is 4.45% with Kent Reliance:

https://www.kentreliance.co.uk/bonds/1-year-fixed-...

[type-r]

Seems to be a lot of comeptition literally driving up the rates within a few hours. Latest 1 yr and 2yr bonds:

Cynergy Bank 1 yr fixed: 4.55%
Allicia Bank 2yr fixed: 4.8%

At this rate, may see a 2yr fixed touch 5% tomorrow.

[Davo123]

I'm regretting taking out a fixed year for 2.95% back in August. The rates are definitely getting better for savers. Hopefully it stays high into next year

Edited by Davo123 on Friday 14th October 23:48

[PositronicRay]

PositronicRay said:

Coventry building society are offering 4.4% 12 month fix.

Looks like its been withdrawn.

[type-r]

BoE governor says interest rates may rise further. Be interesting to see what mini budget reversals Hunt will reveal today and how that will impact proposed hikes at November's BoE meeting. Still need to counter inflation, so I'd imagine a rise of some sort regardless?

https://www.theguardian.com/business/2022/oct/15/m...

[Greenmantle]

type-r said:

BoE governor says interest rates may rise further. Be interesting to see what mini budget reversals Hunt will reveal today and how that will impact proposed hikes at November's BoE meeting. Still need to counter inflation, so I'd imagine a rise of some sort regardless?

https://www.theguardian.com/business/2022/oct/15/m...

he said future rates may need to rise further than already planned. which is great news for savers.

[55palfers]

Davo123 said:

I'm regretting taking out a fixed year for 2.95% back in August. The rates are definitely getting better for savers. Hopefully it stays high into next year

Edited by Davo123 on Friday 14th October 23:48

Me too!

I wonder if it's worth taking the hit on 90 days loss of interest and open a new account?

[type-r]

JN Bank now offering 5% for a 2 year fixed.

https://portal.jnbank.co.uk/saving/fixed-term

[Simpo Two]

55palfers said:

Davo123 said:

I'm regretting taking out a fixed year for 2.95% back in August. The rates are definitely getting better for savers. Hopefully it stays high into next year

Edited by Davo123 on Friday 14th October 23:48

Me too

I've always suspected that if someone offers you a fixed saving rate, it's because they know it's likely to go up, so they will 'win' in the long run.

But interest rates are still barely half of inflation. Have we ever had a savings interest rate more than inflation?

[OutInTheShed]

Simpo Two said:

I've always suspected that if someone offers you a fixed saving rate, it's because they know it's likely to go up, so they will 'win' in the long run.

But interest rates are still barely half of inflation. Have we ever had a savings interest rate more than inflation?

I've always understood banks wanting to lend at fixed rates, then reduce their risk by offering matching fixes to borrowers.

[Flooble]

Simpo Two said:

55palfers said:

Davo123 said:

I'm regretting taking out a fixed year for 2.95% back in August. The rates are definitely getting better for savers. Hopefully it stays high into next year

Edited by Davo123 on Friday 14th October 23:48

Me too

I've always suspected that if someone offers you a fixed saving rate, it's because they know it's likely to go up, so they will 'win' in the long run.

But interest rates are still barely half of inflation. Have we ever had a savings interest rate more than inflation?

https://data.worldbank.org/indicator/FR.INR.RINR?locations=GB

[Simpo Two]

Flooble said:

https://data.worldbank.org/indicator/FR.INR.RINR?l...

It has!

I was rather hoping somebody clever would post a graph so thanks

[Bowser87]

type-r said:

BoE governor says interest rates may rise further. Be interesting to see what mini budget reversals Hunt will reveal today and how that will impact proposed hikes at November's BoE meeting. Still need to counter inflation, so I'd imagine a rise of some sort regardless?

https://www.theguardian.com/business/2022/oct/15/m...

Bear in mind Fixed rate savings are priced from swap rates which are effectively interest rate futures. Part of the reason customer rates have been ramping up is banks making hay whilst the swap rate volatility caused by the mini budget has been going on. Margins suddenly became very attractive. Since the budget u turn these have come back materially to 4.50% ish in the 1yr from well over 5%. So it’s quite possible we’ll see a softening in the short term should swaps remain where they are.

Not the case on variable rates.

Edited by Bowser87 on Tuesday 18th October 22:17

[type-r]

Bowser87 said:

Bear in mind Fixed rate savings are priced from swap rates which are effectively interest rate futures. Part of the reason customer rates have been ramping up is banks making hay whilst the swap rate volatility caused by the mini budget has been going on. Margins suddenly became very attractive. Since the budget u turn these have come back materially to 4.50% ish in the 1yr from well over 5%. So it’s quite possible we’ll see a softening in the short term should swaps remain where they are.

Not the case on variable rates.

Thanks for the info.

What likely affect would say a rumored 1% rise in BoE base rate have on the swap markets in 2 weeks time? I'm currently hedging my bets - will this likely push up the fixed rate market?

[Bowser87]

type-r said:

Thanks for the info.

What likely affect would say a rumored 1% rise in BoE base rate have on the swap markets in 2 weeks time? I'm currently hedging my bets - will this likely push up the fixed rate market?

My view is that’s it’s already baked in. There’s a lag between swap market moves and fixed rate being offered which function almost independently of variable rates/base rate. I think we’ll see fixed rates plateau, maybe creep up; but the bigger moves will come in variable pricing once BOE make their move on the 3rd so the gap between current fixed and variable rates starts to close.

Personally think Bailey has a habit of disappointing vs expectation and that he’ll do 75bps in November, but quite likely to be wrong.

Last few days has seen top of market 1yr go from 4.55 up to 4.75 now back to 4.45%, with potential for that to fall. 1yr Sonia swap currently hovering at 4.49

Edited by Bowser87 on Wednesday 19th October 11:30