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Further Sign Of Impending Rate Rises ?

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Listening to R4 Moneybox program yesterday I heard that the Post Office, Santander and West Brom BS (I think) are offering "inflation beating" savings rates.

According to MSE, the PO offers RPI + 1.5% .. (giving you 6.6% currently) admittedly tax has to come off that, but it's a much better rate than other bank savings rates.

The snag ? You have to tie your money up for 5yrs.. so while they look like competitive rates now naturally the banks are hoping RPI is going to go down and BOE rates up.

Even so, if you think Merv has got us on an RPI death spiral, there could be worse places to put your £

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Yeah, 5 years with Post Office (irish bank), Santander, (Spanish Bank) and West Bromwich (BTL? and subprime), are going to be top safe investments, sort of Icelandic in flavour, with a touch of blarney and tapas.with Black pudding.

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5 years is a long time to tie up your capital in an uncertain market. Saying that you can still get a 5 year fixed mortgage at a lower rate than whats on offer here as a savings account. They must be very confident that inflation will come back into line quickly. I can't see that happening so it could be a winner.

One thing is for sure. With savings rates begining to offer better deals, there is only one way mortgages are going to go. Up up and away.

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"you don’t benefit from compound interest meanwhile."

That's a bit of a catch.

http://www.ft.com/cms/s/2/16261948-4108-11e0-bf62-00144feabdc0.html#axzz1F99pKYyW

.

Thats a big catch. If the interest was calculated and paid yearly and compounded, with £1000 initial deposit you would have £1370 after the 5 years.

Calculated and compounded daily it would be £1385.

Without compounding it would be £1325.

Edit: assuming 5% Rpi throughout

Edited by Pent Up

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"you don’t benefit from compound interest meanwhile."

That's a bit of a catch.

http://www.ft.com/cms/s/2/16261948-4108-11e0-bf62-00144feabdc0.html#axzz1F99pKYyW

that is a bit of a catch indeed but the difference is quite small over 5 years, assuming 6% a year over 5 years you get:

- with PO: 5*6%=30%;

- with a normal account (interest rate paid yearly so compounded): 1.06^5=1.34 or 34%;

a 10 year deal would be a lot worst: 60% compared to 80%...

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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