Written by Karen Bryan
Update 26 July 2015 – The current issue of the Halifax Tracker Bond pays 1.43% above the Bank of England base rate, which equates to a gross rate of 1.93%. There’s speculation that the Bank of England will increase interest rates early next year; a 0.25% increase in the base rate would push up the interest rate paid on the Halifax Tracker Bond to 2.18%. However, the Paragon Bank’s One Year Fixed Rate pays a guaranteed 2.07% and the Paragon Bank Two Year Fixed Rate Bond pays 2.34% on balances between £1,000 to £100,000 could be a better bet. It all depends on by how much, if at all, the base rate changes over the next 18 months.
Update 22 May 2015 – The current issue of the Halifax Tracker bond pays 0.55% above the Bank of England base rate, which equates to a gross rate of 1.05%.
Update 5 December 2013 – The current issue of the Halifax Tracker pays 1.1% above the Bank of England base rate, which equates to a gross rate of 1.6%.
The Halifax Tracker Bond is an 18 month savings account operated by phone or in branch, which guarantees to pay 1.48% above the Bank of England (BoE) base rate, which is currently standing at 0.50%. That equates to a gross rate of interest of 1.98%. If the BoE decide to change their base rate, then the rate of interest which is paid on your savings will change on the first working day of the following month. The minimum required to open the account is £500, with a maximum deposit of £50,000. You can only access your money by closing the account, which incurs a penalty of 135 days loss of interest.
There’s also a Halifax Online Tracker Bond which pays 0.1% more on balances of £50,000+.
It’s hard to judge if the Halifax Online Tracker Bond is a good buy. If the BoE base rate goes down, the Halifax Tracker Bond would be a poor choice, if it goes up then the Halifax Tracker Bond would be a good choice. It would appear that the BoE base rate will hold steady for the next couple of years, although you never know. You have to factor in that the rates of interest offered to savers don’t always precisely correlate to the BoE base rate, so it’s possible that rates paid to savers could drift up or down, independent of any moves by the BoE.
Would I put my money in this product?
I’d first use up my tax-free Cash ISA limit for that year. Then I’d look at other similar products in the market. It’s hard to make a comparison, as I couldn’t find any other eighteen month accounts. Britannia Budding Society is paying 2.03% on its one year fixed rate bond. ICICI Bank is paying 2.3% on its two-year fixed rate bond.
As I believe, on balance, that the BoE base rate will stay at 0.5% for the next eighteen to twenty-four months, the ICICI two-year bond seems like a better home for the cash, as the rate of interest is guaranteed. Getting a gross (before deduction of income tax) interest rate of 2.3% is pitiful. With inflation standing at around 3%, your savings are losing their spending power.
It’s all a bit of a guessing game, but you may need to be decisive, e.g. if you have a maturing savings account in need of a new home.
Interest rates correct on 24 August 2013.