Interest Rates – opportunity; consider Structured Deposit accounts
The Bank of England (BOE) made cuts to the base rate twice in March of this year, on the 11th & 19th. They cut from 0.75% to 0.25% and slashed further to just 0.1%, the lowest recorded level since records began. The intention and hope being to reduce the economic effect of the Covid-19 outbreak & subsequent lockdown. However, this reduction has had a dramatic effect on the savings rates available to UK investors/depositors. Rates are at a very low level and the future prospects look bleak. There is talk of negative interest rates for the first time in living memory. That could be the straw that broke the camel’s back for cash investors. Here are a selection of rates for depositors willing to tie their money up for 4 or more years.
Source: Moneyfacts
You would notice a lack “High Street” names from the above list. If you did prefer to stick to the high street, their savings accounts are opening & closing very frequently as financial institutions adjust to these unprecedented times:
If you want a deposit from a high street bank right now, you can get:
– 0.35% pa from Santander for 2 years fixed
– 0.60% pa from Barclays for 2 years fixed
– 1% pa from Goldmans for 1 year fixed
– 0.70% pa from HSBC for 3 years fixed
(the above rates were correct as at 1 July 2020)
The prospect for any increases in interest rates in the immediate future are pretty bleak. The BOE use a number of indicators when deciding on whether rates go up or down. They are all going in the wrong direction:
- Inflation is falling
- UK economy has slumped & future forecasts have been cut
- Unemployment is rising.
- The pressure is potentially building for more cuts.
Therefore, it is very important that investors look at their cash holdings now and see if there is better home for their money. An alternative to consider would be structured deposits. The market leader is Investec Bank plc. Investec Bank plc offer a range of Structured Deposits on a regular basis where the potential returns are significantly higher than the returns available in the current deposit/savings market.
https://www.bestpricefs.co.uk/investec-structured-products/
Note – for eligible investors the FSCS protection remains at £85,000 per investor, as with interest bearing accounts.
Investing into a Structured Deposit Plan should always be viewed as a fixed term deposit as early encashment would be subject to asset prices.
As always, the promotion of this type of plan is not a recommendation to invest; a recommendation requires a ‘suitability process’ to be carried out following the ‘Know your Customer’ protocols.
If you require advice, simply get in touch.
Warmest Regards.
Best Price FS Team