Money Insider: Savers should lock in on Close Brothers bonds
Saturday 19 November 2011
Savers coming off existing fixed-rate bonds are anxious to lock in to the best rates without having to lose access to their money for an extended period. Those who plumped for a three-year bond back in 2008 will have been getting a return as high as 7 per cent AER in some cases.
However, to secure the best deal on offer at the moment it means tying your cash up for five years to earn 4.7 per cent AER with Yorkshire Bank.
On Monday, Close Brothers stormed to the top slot in the best buy tables with its "Premium Gold" two-year fixed-rate bond paying 4.25 per cent AER. Under the terms of this account, interest is paid annually and the account has a minimum investment limit of £10,000 and a maximum of £10m. For savers not comfortable with locking their funds away for five years this new deal will be very attractive, particularly as it is currently paying a higher return than the best four-year fixed-rate bond on the market (BM Savings and State Bank of India both at 4.2 per cent AER). At more than 0.85 per cent above the average two-year fixed-savings rate and a quarter point ahead of its nearest competitor, there will be no shortage of takers for this product which means its shelf life may be limited. To put this new deal into perspective, it's the highest rate seen on a two-year fixed-rate savings bond for 20 months, since ICICI Bank UK was offering the same 4.25 per cent AER back in March 2010. You have to go back exactly two years to find a higher two-year rate – courtesy of AA Savings' 4.35 per cent in November 2009. For those not familiar with the Close Brothers name, it is authorised by the FSA and a member of the Financial Services Compensation Scheme, therefore savings balances up to £85,000 per deposit holder are fully protected.
Loan rates race nears 6 per cent low
The battle between personal loan providers continues to rumble on, which is great news for borrowers. Sainsbury's Finance and Nationwide Building Society have been the front-runners in the loans race for most of this year, with the latter cutting its rate to its lowest ever level at only 6.1 per cent APR.
Twelve months ago, the best deals were priced at around 6.7 per cent APR, so there's been some significant price cutting taking place in an effort to both boost take-up levels and meet annual targets.
It's possible we may see rates dip below 6 per cent before Christmas, something we haven't witnessed since May 2007.
While the cost of larger loans is falling, those looking for only £1,000 to £2,000 still face having to pay rates approaching 20 per cent in some cases. Also lenders are still very choosy when assessing applications for any type of borrowing, so a tip-top credit rating is a must if you want to secure a best-buy rate.
Index-linked savings may not deliver best returns
There was some minor relief for savers on Tuesday when the Office for National Statistics issued the October inflation data.
The RPI measure edged down from 5.6 per cent to 5.4 per cent in what was predicted to be the first in a succession of reductions if the City experts and a certain Mr King are to be believed.
So what does this mean for people thinking of sheltering some of their savings in inflation-linked savings bonds?
Both the Post Office and BM Savings offer savings bonds linked to RPI for both a three-year and a five-year term. More recently, Santander has joined the fray, offering a slightly different six-year deal.
The conundrum is that even though these products protect you against future increases in the cost of living, they don't guarantee to deliver the best return.
While inflation is expected to drop back sharply in the first part of 2012, the longer-term picture is less clear; however, you could get a better return with a standard fixed-rate savings bond.
As rates stand, the five-year Post Office inflation bond will equal the rate on the five-year bond (4.7 per cent) as long as RPI is no lower than 3.7 per cent, and with BM Savings as long as RPI doesn't dip below 4.2 per cent.
Unlike the previous issues of index-linked certificates from NS&I, interest on the above accounts are to tax, although BM Savings does offer an ISA version at the same rates.
Protecting your cash against the ravages of inflation looks quite appealing at the moment, but sharp falls in RPI are unlikely to be mirrored by falls in savings-bond rates, so a mix of index-linked and standard fixed-rate products would seem quite a sensible strategy.
Andrew Hagger – Moneynet.co.uk
And why are 'southern' ways of speaking spreading north?
- 1 Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
- 2 A forgotten episode in Russian history leaves links with the Philippines
- 3 Scientists sequence oldest human DNA from fossilised leg bone found in Spain
- 4 Cannabis can cause man boobs, US surgeon claims
- 5 Joanna Lumley’s garden bridge over the Thames gets £30m seal of approval from Government
iJobs Money & Business
£50000 - £65000 per annum + benefits + bonus: Harrington Starr: Market Data SM...
£50000 - £70000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£70000 - £85000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£75000 - £85000 per annum + Bonus and Benefits: Harrington Starr: An award win...
Day In a Page
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.
A charming barn conversion in the picturesque Cotswold village of Ilmington with three bedrooms, a detached garage, workshop and beautifully manicured gardens £675,000.
A three-bedroom new build, ground-floor flat with two bathrooms, close to Bermondsey tube, £445,000.
A three-bedroom house in an enviable new development moments from Oxshott High Street, with secluded garden and decked area, £385,000
A two-bedroom split-level flat with stunning south-west facing roof terrace in the popular Brondesbury Conservation Area, £549,950.
A charming 16th century, three-bedroom detached house in Bidborough with picturesque garden
A top-floor one-bedroom flat in the heart of Pimlico with a terrace providing spectacular views over London, £495,000.