Interest rates in the new tax year.

BennyC · 25 Feb 2010 at 19:52

I was wondering if anybody a bit more in the know might be able to advise.

I've a sum of money that I'm looking to tie away for around 18-24 months, most likely into a bond which will currently fetch around 3.9% interest, roughly.

I'll be able to tie this away from mid March but have been advised to wait till the start of the new tax year as banks & building societies will most likely have some new offers and better deals.

Is it likely that we'll see anything more than this? any increase? a decrease? is it likely/unlikely?

I know it's quite a general question, I guess what I'm asking is do interest rates generally rise each new tax year? In regards to the recession did they go up from last year?

I'm not that clued up in regards to whats happening with all the banks at the moment so please refer to laymans terms please!

Thanks

BennyC

Edit: Having just rechecked: http://www.moneysupermarket.com/savings/ it seems Halifax have just brought out some new offers so I guess my question is already answered! In that case can anybody recommend any banks that aren't listed, for such an investment?

OpenToSuggestions · 25 Feb 2010 at 19:58

With inflation increasing recently, the base rate is due to bump up a fair amount soon.

This is my guess anyway. I would think putting money in a fixed account now is a poor choice.

dante6491 · 25 Feb 2010 at 20:08

mglover070588 said:
With inflation increasing recently, the base rate is due to bump up a fair amount soon.

This is my guess anyway. I would think putting money in a fixed account now is a poor choice.

Ditto. With inflation hovering around 3% we should see a rise in interest rates in order to keep people investing. There are still plenty of accounts out there where the interest rate is sub 3% meaning people are effectively loosing money.

BennyC · 25 Feb 2010 at 20:09

mglover070588 said:
With inflation increasing recently, the base rate is due to bump up a fair amount soon.

This is my guess anyway. I would think putting money in a fixed account now is a poor choice.

Thanks for the reply.

I'm vaguely aware of how other investments yeild/risk work but can't afford to place this money somewhere it isn't safe and isn't covered if it goes **** up.

Have you heard of Collins & Bone? A quick google for bonds brought them up.

muon · 25 Feb 2010 at 20:14

dante6491 said:
Ditto. With inflation hovering around 3% we should see a rise in interest rates in order to keep people investing. There are still plenty of accounts out there where the interest rate is sub 3% meaning people are effectively loosing money.

What do you call investment? A rise in the interest rate reduces people making actual investment in capital and firms.

As you said, real interest rates are negative and so its an incentive to not hold cash, but real investments which give a positive real return.

As for inflation rising. BoE February projections:

http://www.bankofengland.co.uk/publications/inflationreport/irfanch.htm

(You may ask, why the solid line doesn't extend to the present date. The reason is that all subsequent figures are subject to revisions and so the probability distribution incorporates that uncertainty and also because the report linked to below was written a couple of months before february)

Unless these turn out to be wrong, combined with low growth, interest rates won't rise meaningfully for about a year or so.

56 Page Inflation report for Feb 2010 http://www.bankofengland.co.uk/publications/inflationreport/ir10feb.pdf with a lot of detail.

thepharcyde · 25 Feb 2010 at 20:53

Halifax 24 months 10 basis points higher.

http://www.halifax.co.uk/savings/Highinterestaccounts.asp

HISAVE 4.6%

http://www.hisave.co.uk/accounts.html