Interest rate thoughts
Discussion
So I was thinking of locking away all of my isa funds in one account for either one or two years.
I can get 4.25% for 2 years with nationwide or 4.10% for one year, even more with other providers.
Dose anyone think we are in for some higher rates later this year?
Also would you risk holding more than £80k with one provider?
Thanks.
I can get 4.25% for 2 years with nationwide or 4.10% for one year, even more with other providers.
Dose anyone think we are in for some higher rates later this year?
Also would you risk holding more than £80k with one provider?
Thanks.
Whistle said:
So I was thinking of locking away all of my isa funds in one account for either one or two years.
I can get 4.25% for 2 years with nationwide or 4.10% for one year, even more with other providers.
Dose anyone think we are in for some higher rates later this year?
Also would you risk holding more than £80k with one provider?
Thanks.
Santander are offering 4.25% for 18mths or 4.20% for 2 years both cash ISA's, so a little better than Nationwide. Coventry looks like the market leader at 4.40% for one year ISA - ignore the homepage saying no transfers in - we opened two today and both clearly permit transfers in once opened.I can get 4.25% for 2 years with nationwide or 4.10% for one year, even more with other providers.
Dose anyone think we are in for some higher rates later this year?
Also would you risk holding more than £80k with one provider?
Thanks.
That said, what's going to happen? Well clearly the market is still pricing that by 2years the peak will have been and gone and rates starting to drop, with 18months being the high point. That maybe right, who knows - crystal ball time, but I for one certainly am expecting at least one more hike of 0.25% even if the news was reporting otherwise 2 weeks ago when the rates last went up. Time will tell.
Would I risk more than £85k with a single provider - well that depends on how much wealth you have. If you only have say £100k in cash then no, dont risk it, its no hassle to open two accounts and spread your risk for potentially a small loss of interest on the 2nd best a/c. But if you have say over £1m in cash to invest then opening up 12+ accounts is a total PITA, plus the losses begin to diminish themselves as a percentage of your portfolio.
You can never tell which will be the next bank to fail, if indeed any more will at all this time around, but some banks are inherently more risky that others for sure. Avoid smaller lenders if possible and go for the big well know names. They are likely too big to ever be allowed to fail, so in that respect the £85k limit becomes a bit meaningless. That said you can never say never, so diversify if you want to be super safe.
Edited by AdamV12V on Friday 7th April 11:20
Mogul said:
Do you Cash ISA dudes know that you can switch to a Stocks & Shares ISA and then buy a Money Market ETF and earn a similar ~4% return without having to lock your money away for 12-24months…
Money Markets seem to be the Thing Of The Week - IM having just launched one. Cash with knobs on it seems.Mogul said:
Do you Cash ISA dudes know that you can switch to a Stocks & Shares ISA and then buy a Money Market ETF and earn a similar ~4% return without having to lock your money away for 12-24months…
Yes of course, but my balanced portfolio already has more than sufficient exposure to the stock market, so for me ISA's are a tax free way of maximising the return on the "safe" cash side of the balance. Even though an ETF is lower risk, its still higher risk than cash in a savings a/c.For other people they simply cannot entertain the risk of loosing anything at all ever via Stocks and Share, ISA or otherwise.
Something to keep in mind for everyone really - never put all your eggs in any one type, shape, make or model of basket!
Edited by AdamV12V on Thursday 6th April 21:32
AdamV12V said:
Whistle said:
So I was thinking of locking away all of my isa funds in one account for either one or two years.
I can get 4.25% for 2 years with nationwide or 4.10% for one year, even more with other providers.
Dose anyone think we are in for some higher rates later this year?
Also would you risk holding more than £80k with one provider?
Thanks.
Firstly its 18mths with Santander for 4.25%, and 4.20% for 2years ISA. Coventry looks like the market leader at 4.40% for one year ISA - ignore the homepage saying no transfers in - we opened two today and both clearly permit transfers in once opened.I can get 4.25% for 2 years with nationwide or 4.10% for one year, even more with other providers.
Dose anyone think we are in for some higher rates later this year?
Also would you risk holding more than £80k with one provider?
Thanks.
That said, whats going to happen? Well clearly the market is still pricing that by 2years the peak will have been and gone and rates starting to drop, with 18months being the high point. That maybe right, who knows - crystal ball time, but I for one certainly am expecting at least one more hike of 0.25% even if the news was reporting otherwise 2 weeks ago when the rates last went up. Time will tell.
Would I risk more than £85k with a single provider - well that depends on how much wealth you have. If you only have say £100k in cash then no, dont risk it, its no hassle to open two accounts and spread your risk for potentially a small loss of interest on the 2nd best a/c. But if you have say over £1m in cash to invest then opening up 12+ accounts is a total PITA, plus the losses begin to diminish themselves as a percentage of your portfolio.
You can never tell which will be the next bank to fail, if indeed any more will at all this time around, but some banks are inherently more risky that others for sure. Avoid smaller lenders if possible and go for the big well know names. They are likely too big to ever be allowed to fail, so in that respect the £85k limit becomes a bit meaningless. That said you can never say never, so diversify if you want to be super safe.
Mogul said:
Do you Cash ISA dudes know that you can switch to a Stocks & Shares ISA and then buy a Money Market ETF and earn a similar ~4% return without having to lock your money away for 12-24months…
No. Cash ISAs are accessible, you just need to close your account and pay a penalty of 90 days interest or so.They are different to non-ISA fixed savings, which are very restrictive and your money is fully locked away.
From a liquidity perspective, cash ISAs are better than money market ETFs, and obviously risk free.
Jiebo said:
No. Cash ISAs are accessible, you just need to close your account and pay a penalty of 90 days interest or so.
They are different to non-ISA fixed savings, which are very restrictive and your money is fully locked away.
From a liquidity perspective, cash ISAs are better than money market ETFs, and obviously risk free.
If you’re saying fixed term cash ISAs are accessible then that’s not always correct - some do not allow withdrawals during the term (except on death).They are different to non-ISA fixed savings, which are very restrictive and your money is fully locked away.
From a liquidity perspective, cash ISAs are better than money market ETFs, and obviously risk free.
A Junior ISA (in the name of a <16 yr old) cannot be accessed/closed until the child turns 18 (or upon the death of the child) but other ISA accounts (all types) which include ‘fixed terms’ can generally be accessed/closed but there can be penalties (some larger than others). This is an advantage over other types of fixed term savings accounts/bonds.
It’s true to say that Cash ISA rates are improving, and the early access penalties are likely to be digestible if there is a liquidity need, but although some are described as ‘flexible’, you need to know what your provider means by that definition as you may find some of their restrictions to be more or less restrictive based on what you would like to achieve…
Another benefit of the Cash ISA as that you can get one from your bank and you won’t have to pay any platform fees to hold it there, but the interest rates on offer have been relatively poor (although improving).
If you find a decent Cash ISA rate in today’s market, they can work.
The potential benefits of money market ETFs are that you can have as much flexibility as you want to dip in and out (although you have transaction charges and platform costs to deal with).
They are therefore pretty liquid (although who knows what would happen when Vlad gets his nukes out, but if he does, we’ll all have bigger things to worry about even if we have the FSCS behind our Cash ISAs).
There is a risk of capital loss but the short-term MM funds are rated 1 on the 1-7 risk scale…
It’s true to say that Cash ISA rates are improving, and the early access penalties are likely to be digestible if there is a liquidity need, but although some are described as ‘flexible’, you need to know what your provider means by that definition as you may find some of their restrictions to be more or less restrictive based on what you would like to achieve…
Another benefit of the Cash ISA as that you can get one from your bank and you won’t have to pay any platform fees to hold it there, but the interest rates on offer have been relatively poor (although improving).
If you find a decent Cash ISA rate in today’s market, they can work.
The potential benefits of money market ETFs are that you can have as much flexibility as you want to dip in and out (although you have transaction charges and platform costs to deal with).
They are therefore pretty liquid (although who knows what would happen when Vlad gets his nukes out, but if he does, we’ll all have bigger things to worry about even if we have the FSCS behind our Cash ISAs).
There is a risk of capital loss but the short-term MM funds are rated 1 on the 1-7 risk scale…
Mogul said:
Do you Cash ISA dudes know that you can switch to a Stocks & Shares ISA and then buy a Money Market ETF and earn a similar ~4% return without having to lock your money away for 12-24months…
Which ETFs are these? I can’t find any GBP denominated Money Market ETFs that yield even 1%Loads of USD ones out there but for people who don’t want to take on more USD exposure are there any serious UK products?
Simpo Two said:
Mogul said:
Do you Cash ISA dudes know that you can switch to a Stocks & Shares ISA and then buy a Money Market ETF and earn a similar ~4% return without having to lock your money away for 12-24months…
Money Markets seem to be the Thing Of The Week - IM having just launched one. Cash with knobs on it seems.I notice banks are in there, and we all know what happens to bank bonds if the bank goes tits up these days… bailed in.
Unless you’re not being a bank bond holder?!
Simpo Two said:
Mogul said:
Do you Cash ISA dudes know that you can switch to a Stocks & Shares ISA and then buy a Money Market ETF and earn a similar ~4% return without having to lock your money away for 12-24months…
Money Markets seem to be the Thing Of The Week - IM having just launched one. Cash with knobs on it seems.Not my sphere, but does an Exchange Traded Fund involve borrowing, therefore create gearing to (hopefully) magnify returns ?
What could possibly go wrong, if debt is involved ?
Edited by Jon39 on Saturday 8th April 12:32
Boo-urns said:
Interesting prediction from the IMF: https://www.bbc.co.uk/news/business-65237286
Everything I've seen so far seems to point to 4-5% being the 'new normal', or the 'old normal', if you look at things from a long-term perspective.
They are talking about real interest rates of 1 to 2%, which I take to mean 1 to 2% over inflation.Everything I've seen so far seems to point to 4-5% being the 'new normal', or the 'old normal', if you look at things from a long-term perspective.
So quite likely in the 5% area for a while?
But how many of these genius economists predicted today's interest rates 5 years ago?
OutInTheShed said:
Boo-urns said:
Interesting prediction from the IMF: https://www.bbc.co.uk/news/business-65237286
Everything I've seen so far seems to point to 4-5% being the 'new normal', or the 'old normal', if you look at things from a long-term perspective.
They are talking about real interest rates of 1 to 2%, which I take to mean 1 to 2% over inflation.Everything I've seen so far seems to point to 4-5% being the 'new normal', or the 'old normal', if you look at things from a long-term perspective.
So quite likely in the 5% area for a while?
But how many of these genius economists predicted today's interest rates 5 years ago?
It’ll be going way up over 5% for a bit imo.
Reversion to the mean is never smooth. And overshoots are expected.
I’m starting to think 7 or 8%
Wheels come off into a recession.
Drop to ~ 4-5% to stimulate economy.
Back to ‘normal’ trend.
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