HOW TO MANAGE YOUR MONEY WHEN INTEREST RATES FALL THROUGH THE FLOOR

ALTHOUGH negative interest rates aren’t guaranteed, it does appear we are headed for a long period of very low interest rates, which will have a very similar effect. It might make sense to restructure your finances accordingly...

youR savings

With National Savings & Investments cutting its rates hugely in recent days and Goldman Sachs’ Marcus account, which was one of the higher-paying, doing the same, there is little left for savers looking for guaranteed high returns.

Coventry Building Society has just launched a Double Access Saver at 1.05 per cent that allows you to make two withdrawals a year without penalty. Any withdrawals beyond that face a penalty of 50 days’ interest (based on the amount withdrawn).

If you can put money away for longer, you could get better rates, and ensure that you don’t fall victim to an early rate cut.

Gatehouse Bank is offering 1.26 per cent on a one-year bond, or 1.36 per cent if you are OK to lock your money away for two years. Some people may wish to take a greater risk for a higher return.

Rachel Winter, associate investment director at stockbroker Killik & Co, says the firm is receiving many calls from people who had previously had all of their money in savings but now wish to invest because of the low rates they are getting.

‘It is difficult to find low-risk investments, though,’ she cautions.

If you are going to invest, it is important you understand what you are investing in, and that you create a diversified portfolio rather than

risking everything on one stock. An independent adviser could help to ensure that your investments match your risk tolerance.

YOUR MORTGAGE

For existing mortgage holders, there may be benefits in remortgaging at low rates, especially if you are coming to the end of a deal.

Ray Boulger, at John Charcol, says that for those with plenty of equity in their homes, or large deposits, there are good deals to be had at the present time.

However, he adds that if rates fall further there may be even cheaper deals to come, so suggests that remortgagers take on deals with no Early Repayment Charges in the hope there will be better mortgages available in a few months’ time. ‘There are several of these products available,’ he says, recommending a Barclays tracker at Bank Rate plus 1.35 per cent for those with 40 per cent equity in their homes. The fee is just under £1,000 for this.

For first-time buyers with a 25 per cent deposit he suggests a Nationwide deal at Bank Rate plus 3.24 per cent.

‘This is good value. The fee is £999, but there is a cashback of £500,’ he says.

YOUR cREdIT cARdS ANd LOANS

The rates on these are unlikely to change even if Bank Rate becomes negative and it makes sense to pay these off as quickly as possible – prioritising those with higher rates.