5.8% 1yr fixed savings vs. 4.21% easy access - opinions wanted!

[ilovechrist420]

Hi all,

Keen to hear your opinions / strategies on this:

- Oxbury currently offering a 5.8% interest rate (at maturity) for a 1yr fixed rate.

- Chip currently offers best easy-access at 4.21% ( but of course likely to track BoE interest rates).

In the past, I've found that fixing savings (anecdotally) results in less interest gained overall as easy access rates end up out-stripping fixed rates, but this was of course in the context of a low interest environment.

The current market predictions are that BoE interest rates will be 6% by the end of the year (and stay at that), and Chip seems to track at BoE rate minus 0.8% (approximately), which would place the Chip easy access rate at approx. 5.2% by the end of the year.

In that sense, the fixed savings makes sense, but of course this is a 'bet' on interest rate hikes, and I'm sure Oxbury and other banks have taken this all into account in their calculations.

Nonetheless, wanted to hear everyone's opinions on your strategy. In my position, I likely won't need significant access to any capital anyway, so that isn't a factor in my decision making.

Looking forward to hearing everyone's thoughts!

 

[nedlm10]

@ilovechrist420 Do either of them have amount limits?

If not then mathematically 5.8% makes sense assuming you can guarantee you will not require that money.

If there’s any chance you will or if there’s a limit to the accounts then go with the easy access.

As you say, It’s probably likely chip will raise a bit over the rest of the year so the difference may be less.

 

[soul_tsunami]

@ilovechrist420 You can look at what the market has priced in by looking at the SONIA swap rates for 1 year, 2 years etc: https://www.chathamfinancial.com/technology/european-market-rates

Of course, just because that is what the market currently thinks will happen, doesn't mean it will.

I would personally fix at 5.8%. Unless you're likely to go over your personal allowance, in which case look at fixed ISA's.

 

[jth5]

@ilovechrist420 In case it's helpful, Barclays also offer a 5.12 % savings account on amounts up to £5,000 which would reduce the difference and is also an easy access account. It has some conditions like a minimum pay in and 2 direct debits needed. I just transfer money through it each month.

Otherwise the 5.8 % makes sense to me, as long as you're 100% sure you don't need the money.

Another option would be keeping the lump sum in the easy access and drip feeding the money into a higher paying regular savings accounts that have monthly deposit limits.

 

[carbon_64]

@ilovechrist420 "It’s looking increasingly likely that rates will continue to rise throughout 2023, and analysts are not expecting rate cuts until late 2024.

Indeed, analysts and markets are predicting rates could peak at as much as 6% by the end of the year."

https://moneyweek.com/economy/uk-ec...-4E78-9041-5EB2A3C6B52B&utm_source=SmartBrief

So I think your logic is sound. Fix for one year.

 

[raiders47]

@ilovechrist420 I invest 1k a month instead of putting it all in at the same time, the thinking behind this is that it will allow me avoid any major cash flow issues either now or in the future as I'll have 1k becoming available each month

 

[resjudicata]

@ilovechrist420 Can you continue to top up the qccount, or open more, once it's open?

I'm looking at their 2 year 5.8% fix but would like to keep depositing.

 

[vab]

@ilovechrist420 what’s the amount? yes it’s extra money but is it really worth it for a hundred pound?

 

[alcwj]

@ilovechrist420 How much are we talking?

It's a 1.6% difference. For £10k no one gives a fuck. For £100k is worth a bit of attention.

Bear in mind you also pay tax on interest and the allowances are tiny. For a higher rate it's £500 before 40% tax. Takes a big bite out of % return.