For How Long Should You Fix the Interest Rate on Savings?

Written by Karen Bryan

I am back to the old dilemma of trying to decide into which fixed rate savings account to put my cash. There is talk of UK interest rates increasing in the near future. But I’ve heard that a few times over the last decade.

It doesn’t seem that you get a much higher rate of interest for tying up your cash for three years as opposed to three years.

However, I’d made the mistake of opting for shorter term fixed rate accounts a few times. When these fixed rate bonds mature, the rate of interest on new bonds has been lower than when I put cash into the maturing bonds.

The differential between a three and a one year standard fixed rate account is currently standing at around 0.3%.

So is it a good bet to select a one year account in the hope/expectation that interest rates on savings account will be higher than they are at present in 12 months time?

Who knows? All I know for certain is that my savings are losing their spending power, as the rate of interest paid on my savings is lower than the rate of inflation

I suppose there’s the option to put 50% of my cash into a one year fixed rate account and the remaining 50% into a three year fixed rate account.