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In February I deposited £25,000 in a two year fixed savings bond with an interest rate of 1.65%.
At the time, it was the best two-year contract on the market, so I thought I was making a smart move.
Since then, I never imagined that interest rates would rise so much. Best his 2 year fixed contract pays interest almost 3 times what I currently earn.
I worry that I’m missing a golden opportunity for savings rates and that interest rates will fall again by the time the two-year contract expires in February 2024. Did it.
Is there a way to terminate my current fixed rate contract early?
Lockups: When you enter a fixed rate savings account, you usually cannot access your money until the fixed rate period ends.
Ed Magnus of This is Money answers: Anyone trying to time the savings market will be out of work this year.
Interest rates have continued to rise over the past 12 months, and there are now many long-term fixed deals above 5%.
However, the highest one-year rate isn’t far behind: the highest one-year contract pays 4.5% and the highest two-year contract pays 4.8% – both courtesy of Gatehouse Bank.
Even the most easily accessible savings rates will pay you far more than what you are currently getting. Once again offered the best easy access deals with Gatehouse Bank paying 2.8%.
See the latest savings rates with our independent Best Buy table.
By saving £25,000 on a 2-year fixed rate savings deal that pays 1.65%, you will earn £831 in interest over 2 years.
However, someone hiding £25,000 on today’s best two-year deal would make £2,457 over two years.
It’s easy to look at the rates now and kick yourself for not waiting. However, it is important to remember that there are many rescuers who have done worse by taking no action.
A staggering £267 billion is hidden in zero-interest checking accounts.
A further £461bn was in easy access deals at less than 0.5%, a Paragon Bank analysis last month revealed.
Unfortunately, withdrawals are usually not allowed until the end date, so you can’t easily get away with a fixed rate savings deal.
Many providers simply state that withdrawals are not possible, while others make it clear that access will only be granted in exceptional circumstances.
For example, Gatehouse Bank reserves the right, unless the account holder dies, becomes mentally incapacitated, becomes bankrupt, or otherwise in exceptional circumstances agreed to by Gatehouse Bank in its “absolute discretion”. It states that the funds cannot be withdrawn.
Aldermore Bank said: 90 days interest may be deducted as a condition of granting permission.
Market Timing: Some savers refrain from locking their money into fixed-rate deals in the hope that a better deal is just around the corner.
Atom Bank, on the other hand, said:
“The only exception is in cases of financial hardship. This will be evaluated on a case-by-case basis and we may be able to withdraw some or all of the money from your account before the term ends.”
We spoke to a savings site expert master of savings To see if there is room to exit a fixed rate deal early.
Can I terminate my fixed-term contract early?
The Savings Guru responds: After a saver signs up for a fixed rate savings account, they are not entitled to access their money. Nor is the bank required to provide a cooling off period.
As such, savers should only put money into fixed accounts that they will never need to access during the period.
Contrary to popular opinion, however, banks are not all bad. If there are exceptional circumstances, the bank will listen to your case sympathetically and have discretion as to where this can be done.
They have policies about what is acceptable and what is not. For example, if you buy a property in the middle of the term and decide to use a fixed deposit account to pay the security deposit, that’s not enough.
However, if you are dying of cancer and need money for treatment, your health care provider will consider it a favor.
Similarly, savers who are currently laid off and who are going to lose their homes because they can’t pay their mortgages or rent are situations in which I would expect banks to help.
Banks must record all requests, take a consistent approach, and demonstrate that they are not allowing savers to access their money for any reason. FCA may ask to see these records to confirm this.
Ed Magnus adds: It is clear that a fixed rate savings contract cannot be terminated early unless there is a serious reason, such as serious illness or serious financial problems.
Now that interest rates have risen, exiting early just to get a better deal is not something that existing savings providers are ready to accept. Become.
In the meantime, don’t worry about what interest rates will be or berate yourself for committing too early. At least you acted.
Many people still have savings in their accounts, returns are well below 1.65%, and those who have held off until now will miss out on several months of interest, even though interest rates will drop. will be
What about fixed rate cash Isa deals?
The Savings Guru responds: Cash Isas is different. The saver has a statutory right to access her Isas, even if it is fixed, but the provider can charge against this.
Typically, banks charge 90 days for 1-year contracts, 180 days for 2-year contracts, 270 days for 3-year contracts, and 365 days for 5-year contracts.
Therefore, canceling Isas is costly. Also, you may not get all your money back, especially if you cancel early in the semester.
However, if the worst happens, at least savers can get their money back.
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