Interest rates actually fall!

By Kieran Drew
In September 6, 2016
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46196727 - interest rates documents with calculator

Rates have fallen to 0.25% but what impact will this have on your savings?

There will probably be very little change. The returns on your savings accounts are so low that any fall will be very small also. To put it into perspective, if you have £10,000 on deposit with, for example, Yorkshire Building Society at a rate of 1.24%, the return following the reduction in rate to 1% is only £24 for the year.

The problem of low savings rates is affecting most people, and there is no real solution. When the Bank of England rate is 0.25%, consumer rates will fall because the government wants you to spend and not save!

With rates so low, people are looking for other ways to generate interest. But remember, when a rate looks too good to be true, it usually is (remember Iceland’s bank!). This can be seen with the recently launched London Capital & Finance Bond.

The LC&F bond IS NOT the same as a bank deposit. It is a bond, which means that there is NO capital guarantee. With bank and building society accounts, they take the risk of default. With this type of bond YOU take the risk.  Both the interest return and the security of the capital depends on borrowers repaying their loans. There is no FCA investor protection for this type of bond, because it is not a deposit. Any interest that you receive is subject to tax at your marginal rate and must be declared on your tax return.

This does not mean that you shouldn’t use these types of bond, but it does mean that you should NOT use them instead of putting money on deposit. Money on deposit is on deposit for a reason, and that reason is capital protection. Therefore, do not put money that needs capital protection where there is no protection.

 

Disclaimer

Your capital is at risk. Investments can fluctuate in value and investors may not get the amount back they invest. Past performance is not a guide to future performance. Tax rules can change at any time.

Please remember your home or property may be repossessed if you do not keep up repayments on your mortgage.  We give clients the option to pay for mortgage advice by fee rather than commission. Equity Release refers to lifetime mortgages. To understand the features and risks, ask for a personalised illustration.

The Financial Conduct Authority do not regulate, Will Writing, Buy to Let Mortgages, Auto Enrolment, Tax Advice and Estate Planning.

The opinions contained within this blog, do not constitute financial advice and no action should be taken based on this content alone.

 

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Redwood Financial Family Wealth & Estate Planners Ltd is Directly Authorised and regulated by the Financial Conduct Authority. FRN number 774469.

Disclaimers

The Financial Conduct Authority do not regulate, Will Writing, Buy to Let Mortgages, Auto-Enrolment, Tax Advice and Estate Planning. Your capital is at risk. Investments can fluctuate in value and investors may not get the amount back they invest. The guidance and/or advice contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK. https://register.fca.org.uk/

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Registered Office Address: Wellesley House, 204 London Road, Waterlooville, Hampshire,