Stick to short fixes ahead of Brexit
SAVERS should keep their money in a mixture of easy-access accounts and shortterm bonds to weather the Brexit storm, experts say.
No one knows what will happen to interest rates, but the general view is they will not change significantly over the next 12 months. Economists do not expect rates to rise until next summer and even then, it is thought they will edge up slowly.
Pantheon Macroeconomics forecasts that the Bank of England base rate will rise from its current 0.75 pc to 1.25 pc by December next year. Ernst & Young ITEM club predicts that rates will have only increased to 1 pc by then. But it all depends on how well our economy performs and rates could even go down, experts say.
Patrick Connolly, from independent financial advisers Chase de Vere, says: ‘While we are in the shadow of Brexit stick to easy-access accounts and one-year fixed-rate bonds. You’ll see very little extra interest for tying your money up for longer.’ Danny Cox, from Hargreaves Lansdown, says: ‘ My preference is for one-year fixed-rate bonds and easy-access accounts to cover unexpected expenses.’
The average one-year fixed-rate bond rate for new savers is currently 0.94 pc. But you can more than double this by searching out the best deal.
Big banks often pay much less. HSBC, for example, pays 0.65 pc, Barclays 0.7 pc and Santander 0.5 pc or 0.7 pc for its 123 customers. Halifax and Lloyds do not offer a 12-month bond and only pay 0.7 pc and 0.65 pc respectively for two years.
New banks such as Atom Investec and Tandem offer one-year deals at 2.05 pc and Market Harborough BS pays 2.01 pc.
Charter Savings Bank and Kent Reliance pay 2.01 pc and Ford Money 2 pc. The top rates are typically only on offer for online or app customers. However, Kent Reliance, often among the best payers, will let you open an account through its branches, by post or online. Last week it was joined by Charter Savings Bank which now lets you open its bonds through the post. Since its launch three years ago, it had previously only offered its top-paying bonds online.
Paul Whitlock, director of savings at Charter, says: ‘Our research told us many customers would prefer to apply for and operate their accounts by post, rather than go online to find the best rates.’
New banks come with the same safety net as old-established firms. Under the Financial Services Compensation Scheme (FSCS) up to £85,000 of your savings are covered should the bank run into trouble, or £170,000 in joint accounts. You can expect your money back within seven days.
The top one-year bond in the High Street is 1.7 pc with Metro Bank. More widely available is a 1.5 pc from Yorkshire BS, 1.45 pc from Newcastle BS and 1.4 pc from Leeds BS.