Banking/Savings Section

Are Interest Rates Going To Fall? If So These Fixed Rate Bonds Are A Great Investment

January 2006

Many market experts are predicting a fall in UK interest rates in 2006. If so, check out these two fixed rate short term bonds because they look very attractive.

EBond 4 - West Bromich Building Society

• Pays 5.10% fixed for a year
• £1,000 minimum, £1million maximum
• If you like your interest paid monthly the bond pays 4.98% gross
• www.westbrom.co.uk

2 Year Fixed Bond at 5.11% - Lambeth Building Society

• 2 years fixed at 5.11%
• Minimum £500, maximum £200,000
• Money must be left untouched until Feb 1 2008 or lose 180 days of interest
• www.lambeth.co.uk

Important Point

Note that these types of bonds can sell out quickly. The bank or building society will usually allocate a set amount and once that is taken the bond offering closes. For example, they might allocate £100 million to the bond and therefore if you're not quick you might find that other investors and savers have already deposited a combined £100million. Of course, this all depends on just how juicy the interest rate is alongside how many years the capital has to be locked up for.

Summary

Some will argue that you can beat these types of returns with an instant access deposit account. This is true but instant-access accounts are never fixed. It's therefore possible that if interest rates fall the interest paid on deposit accounts will also drop. What we like best is a mix, say 50%-75% in a fixed account (assuming that you will never need quick access to your money) and the balance in instant access.

Think about points such as this because sensible planning can yield higher returns for your cash.

See Also

• Find's List of Saving Account Links