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Should I transfer temporarily to an easy access ISA and see what comes on offer in April? Or should I get what seems to be a good rate at the moment by fixing for 2 or more years?
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410I would be surprised if rates move much by April.
manzanilla
Posted on 08 January 2010 |
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804No-one really knows what will happen over the next few years. All we know is that interest rates can hardly get lower with BoE Base Rate at 0.5%, so rates must go up.
The questions are 'When?' and 'By how much?'.
When I compare rates for different terms, I work out how much they are effectively offering for the individual years and compare them with what I think may happen.
Take the comparison between 3 years and 4 years, for example. For simplicity, I multiply the 4 year rate by 4 and the 3 year rate by 3 and take the difference. That is the effective rate for the fourth year. They don't have to be all the same provider. They are better done by comparing the best in market for each period.
Do that for each year and you will have a series of one year rates to compare with what might happen.
I haven't answered your question but I hope the answer has helped you to answer it for yourself. Better that way!
Mike
Posted on 08 January 2010 | Love 1 love
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0Thanks for that. I am reluctant to consider fixing for more than 2 years in the current climate. You'd expect rates to be rising again by then, wouldn't you?
Posted on 08 January 2010 | Love 0 loves
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804grannymabe
I would suggest that you try my suggestion and see what it produces before dismissing the idea of a longer fix. The figures might change your mind.
Bear in mind that Alatair Darling reckoned that RPI would peak at 3% and then fall back to 1.5% but gave no timescales.
Mike
Posted on 08 January 2010 | Love 0 loves
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272grannymabe
Current Bank of England predictions are that interest rates will have to stay at 0.5% and we'll need to keep the £200bn of QE until at least 2012 in order to bring inflation back to the 2% target by then. So you should probably look to fix for at least 2 years. Beyond then, it depends on how the economy performs over the next two years and what is changed first when inflation starts to rise - interest rates or the quantitative easing. As Mike says, interest rates can't go much lower, but they may not rise significantly until 2014 if the economy is as bad as it appears. In the Great Depression prices fell constantly from 1928 to 1934 and that could potentiallly happen again, in which case interest rates will not move an inch. So I'd say definitely fix for at least two years, and consider fixing for 3 or 4 if the rate is substantially better.
Posted on 09 January 2010 | Love 0 loves
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0Thanks, both, for your erudite replies. I think I can now make a better-informed choice!
Posted on 09 January 2010 | Love 0 loves
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