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Better than Savings
Better than Savings
While recent interest rate drops have been good news for some mortgage holders, they are not quite such good news for savers who in the last few weeks have seen rates plumet on their savings accounts. Almost without exception, providers have reduced the rates they offer on savings and many have withdrawn high-interest products altogether.
As a result, those with savings now find themselves with few products offering higher interest than the rate of inflation. For example, in the UK, there are now virtually no providers offering 1-year fixed-rate 6% returns on savings – just a short time ago, these savings accounts were common.
With further interest rate cuts forecast for the very near future, many savers are understandably asking themselves where the best place is for their money. “In times of financial uncertainty, finding a secure destination for your money and one that provides a good return can be difficult,” says Ken Thorkildsen, Director of Obelisk Private Finance. “However, there are some providers still offering reasonable rates on savings accounts and it’s also worth looking into alternatives.”
As Ken points out, the key to finding an account with a good interest rate is acting quickly and prudently since higher rates tend only to come with longer-term conditions. And if you want better interest for your money you may have to be prepared to deposit your savings for a minimum of a year. “Ideally, you should look into locking your savings in a fixed-rate account if you can afford to,” advises Ken, “because this sort of account isn’t affected by falls in the base rate. However, there are other options offering better returns.”
For those with small amounts of savings, Ken suggests looking at government bonds, which have the major advantage of being 100% secure. Government bonds (sometimes known as treasury bonds) have traditionally been overlooked by savers who have prefered the higher interest offered by banks. However, with the massive government investment involved in rescuing banks and other financial entities, government bonds look set to offer excellent returns.
“Although governments are currently paying out huge sums of money in rescue packages, once the rescued entities have recovered, the government will recoup the initial investment, which will be returned via government bonds when they mature,” Ken predicts. “This is an ideal option for a cautious investor or anyone looking for a better return on their hard-earned savings. The total security offered by government bonds is an additional benefit.”
However, even the most successful government bonds are unlikely to provide you with more than 8% or 9% interest and for those looking to earn the most from their money, now may be the time to seriously consider putting them into property. “Only bricks and mortar in emerging markets are providing genuinely high returns now,” says Ken, “and if you’re preparing to invest medium to long term, say 5 years, then you can expect far higher returns than from a savings account.”
Ken advises looking into foreign mortgages as a way of making your money work even harder, but as he points out, property investment should only be undertaken after proper research and due diligence.
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