To fix or not to fix…that is the question!

01st June 2017

2017 has seen more than five times the number of improved fixed rates enter the market

With economists currently predicting a long-awaited increase in the Bank of England base rate at the earliest towards the end of 2018, those banking on an increase in the near future may be sorely disappointed.

So, for many savers the question is whether to go for a fixed rate now or to stick with a variable rate in the hope that better rates are just around the corner. Whilst this is a tricky question to answer with any certainty, it is worth looking at what has happened to fixed rates so far this year in more detail and consider this in relation to what may happen going forward.

The perceived wisdom is that with rates generally at a low level, there is only one way they can go and that is up! Therefore, many could be sticking with a variable rate account, ready to pounce on the great rates that are bound to turn up soon. However, the base rate has not increased for nearly ten years now, so those hoping that the Bank of England will come to the rescue could be waiting for a bit longer yet. It is also worth considering that savers may have missed out on precious interest in the meantime, whilst waiting and hedging their bets.

The most recent prediction for the base rate to change is late 2018 and with the added complication of Brexit, which may also influence the rate setters at the Monetary Policy Committee in their decision-making, a fixed rate may be worth another look.

2017 has seen more than five times the number of improved fixed rates enter the market (454), compared to the same period in 2016 (89) and a number of providers have been actively competing in the fixed rate market so far this year.

In the last few weeks, we have seen market-leading rates launched by Charter Savings Bank and Paragon Bank and a whole host of improved offerings from the likes of Hampshire Trust Bank, Al Rayan Bank, Zenith Bank and Shawbrook Bank.

With these improved rates coming into the market, now could be the time to consider a fixed rate and whilst some may be reluctant to tie their money up for as long as five years, a compromise could be a shorter term, such as one or two years, allowing you to review the situation sooner.

For a range of different options, over various different terms, ranging from 1 to 5 years, take a look at our Fixed Rate Bond Best Buy Tables or if you are looking to utilise your cash ISA allowance, we have Fixed Rate Cash ISA Tables as well.

Ultimately whatever we feel will happen over the coming months and years, it remains impossible to accurately predict the future and so choosing the right accounts to go for could leave many wondering what to do next. Another approach to consider would be to build a balanced savings portfolio – getting higher returns through fixed rate accounts, but also utilising easy access accounts, such as RCI Bank’s Freedom Savings Account, which is the top-paying account on the market at the moment with unrestricted access to funds.

Using this approach allows you to still hedge your bets, waiting for improved rates, but not putting all of your eggs in one basket, using the higher returns from fixed rates to ensure that you are not missing out on precious interest in the meantime.

If you need help building your balanced savings portfolio or wanted to discuss any aspect of your current savings situation, please do not hesitate to get in touch. Our savings experts are available to call free on 0800 321 3581, we’d love to hear from you.

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