National Savings & Investments (NS&I) has announced that it will reduce rates on its variable rate savings products, premium bonds, as well as some fixed term saving accounts, on the 24 November.
NS&I is set to reduce rates on its Direct Saver to 0.15% gross, Investment Account to 0.01% gross, Income Bonds to 0.01% gross, Direct ISA to 0.10%, and Junior ISA to 1.50% gross.
Along with reducing rates on its saving accounts, NS&I is set to reduce the rate on its premium bond prize draw. The reduced rate will see the odds of winning fall from its current rate of 24,500 to 1, to 34,500 to 1 from the December draw onwards as the number of those winning prizes is reduced.
Alternatives to premium bonds
Fixed rate bonds and easy access accounts are the most usual alternatives to premium bonds. In addition to these structured deposits have the security of guaranteeing that the initial capital invested is returned to the investor but do not guarantee the investor will earn a return. This is because money invested in a structured deposit is invested in relative to the stock market and, as such, returns will depend on how the stock market index performs. This means that if the stock market performs well, those who have invested in a structured deposit could earn a better return than investing in premium bonds. For more information about investing in structured deposits, visit our structured deposits page.
Another, but risker option, is investing in stocks and shares ISAs. Stocks and shares ISAs are riskier because investors not only risk not earning a return on their investment, but may also lose all the capital they initially invest. However, investing in stocks and shares ISAs could also result in earning higher returns than both premium bonds and structured deposits, as well as currently offering a tax-free limit of £20,000 per tax year. Normally, those looking to invest in stocks and shares ISAs should do so only as a long-term investment, usually for a minimum of five years, and they should be fully aware of the risks involved in this type of investment before committing their money. More information about stock and shares ISAs can be found on our stocks and shares ISA page.
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United Trust Bank offers a rate of 1.30% AER on its two-year fixed rate bond, the UTB 2 Year Bond. The account can be opened online with £5,000 and is operated by post, online and by phone. Interest is paid on anniversary.
Windfall bonds from Family Building Society – the alternative to premium bonds
If you hold £10,000 of Premium Bonds, the odds of winning at least a £1,000 prize in a year are one in 357^. Compare that with the Windfall Bond, which offers odds of one in 60 of winning a prize of £1,000, £10,000, or £50,000 in the first year… and pays interest too.
The Windfall Bond is a unique savings account, quite unlike any other. It allows you to keep your capital secure and accessible#, earns interest at the Bank of England Bank Rate and enters you into a monthly prize draw for the chance to win up to £50,000.
The stats speak for themselves. The odds of a Windfall Bond win are nearly six times better than Premium Bonds.
Every month, your Windfall Bond is entered into a free draw* for a chance to win one of 21 prizes: 15 prizes of £1,000, three prizes of £2,500, two prizes of £10,000 and one prize of £50,000.
Each Windfall Bond needs an investment of £10,000, and you can hold as many bonds as are available in each issue. Premium Bonds do not pay interest and there’s a £50,000 limit on the number of bonds you can hold.
Interest bearing and better odds? We think it’s a no brainer.
# Eligible deposits held with Family Building Society are protected up to a total of £85,000 by the FSCS. Windfall Bond funds are accessible without access charge by account closure after 35 days’ notice.
* A qualifying period applies. Each Windfall Bond will be eligible for the first draw in the second calendar month after being opened.
** Monday to Friday: 9am – 5.30pm. Saturday: Closed. We may record any telephone calls we have with you in the interest of staff training, monitoring customer service or for security purposes.
All financial information was correct at 13 August 2020.
• Cynergy Bank and Skipton Building Society both offer a rate of 1.00% AER for their easy access ISAs. The Online ISA (Issue5) from Cynergy Bank can be opened and managed online and an Authenticator App or Digipass required to open and operate the account. The minimum balance is £1. Transfers-in from other cash ISAs only are allowed and these must be made when the account is opened. Interest is paid yearly. The eISA Saver Issue 6 from Skipton can also be opened online and with a £1. Transfers-in from are allowed from cash ISAs and stocks and shares ISAs only. Interest can be paid on anniversary or monthly and this can be compounded or paid into another account..
• Coventry Building Society offers a rate of 0.96% AER on its Triple Access Isa (Online). The account can be opened and managed online. The minimum balance is £1. This account restricts you to a maximum of three withdrawals per annum. If you make more withdrawals, then you will lose 50 days’ interest. Interest can be paid on anniversary or monthly.
• Chorley Building Society’s its Easy Access Cash ISA pays 0.95% AER. This account can be opened online, by post or in branch. You can only manage this account in branch or by post. The minimum deposit is £1 and interest is paid yearly, which must be added to the ISA. Transfers-in are allowed from cash ISAs and stocks and shares ISAs only.
At a time when the stock markets are volatile and savings rates remain low, many with lump sums to invest are looking for alternative forms of investments, with buy-to-let (BTL) becoming increasingly popular, especially with the raising of the stamp duty threshold to £500,000 until March 31 2021 making buying a property more attractive to investors.
First-time landlord rates
First-time landlord average rates have been rising. Since March, the average rate on a two-year fixed 75% loan-to-value (LTV) first-time landlord deal has increased from 2.83% to 3.01%, and the average two-year fixed rate at 60% LTV has increased from 1.89% to 2.41%. It is a similar picture in the five-year fixed chart, with the average rate at a 75% LTV increasing from 3.39% in March to 3.63%, and the average 60% LTV rate increasing from 2.44% to 2.98%. Comparing rates year-on-year, first-time landlord average rates have increased on deals at 60% and 75% LTV in both the two and five-year fixed BTL charts.
Existing landlords BTL rates
Average rates across all BTL deals have fallen since March. The average rate on a two-year fixed deal at 75% has fallen from 2.29% in March to 2.17%, and the average rate at 60% has decreased just slightly from 1.80% to 1.79% during this period. In the five-year fixed BTL chart, the average rate at 75% LTV has fallen from 2.56% to 2.40% and the average rate at 60% from 2.12% to 2.04% between March and today. Year-on-year, average rates on all two and five-year BTL deals at 75% and 60% LTVs have fallen.
Product Spotlight: Best two-year fixed rate remortgages
Here are the top rates for two-year fixed rate remortgages at 60% loan-to-value (LTV) available directly from a lender in Great Britain:
• Lloyds Bank offers a 1.17% (3.3% APRC) fixed rate until 30 November 2022, after which the rate increases to 3.59% variable. There is a fee of £999 and it comes with free valuation and legal fees. Those with a Club Lloyds account can also receive £200 cashback.
• Virgin Money offers a fixed rate of 1.24% (3.8% APRC) until 1 January 2023, after which it reverts to 4.34% variable. The fee is £1,495 and it comes with free valuation and legal fees.
• Nationwide Building Society offers a rate of 1.24% (3.3% APRC) fixed for two years, and after this the rate increases to 3.59% variable. The fee is £999 and free valuation is included. There is a choice of £500 cashback on completion or free legal fees.
*Excludes existing customer only or location specific products
Representative Example: £178,000 mortgage over 25 years initially at 3.24% fixed for 24 months reverting to 3.59% variable for term. 24 monthly payments of £866.48 and 276 monthly payments of £897.43. Total amount payable £269,535.20 includes loan amount, interest of £90,486, valuation fees of £0 and product fees of £999. The overall cost for comparison is 3.6% APRC representative.
DEAL OF THE WEEK
Guarantor Mortgage 100% LTV
The Tipton’s Family Assist mortgage allow you to borrow up to 100% loan to value, with the support from your family members. Your relatives can opt to accept a security charge against their home, or deposit savings into an account with the Society, until you have enough equity in the property for this to be removed. Their Flexible Family Assist product also allows you to put down anything between a 1% to 10% deposit, reducing the amount of security your family member will be required to provide.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Representative example: £178,000 mortgage over 25 years initially at 3.09% fixed for 62 months reverting to 4.94% variable for term. 62 monthly payments of £852.45 and 238 monthly payments of £1000.02. Total amount payable £291,281.66 includes loan amount, interest of £112,857, valuation fees of £250 and product fees of £0. The overall cost for comparison is 4.3% APRC representative.
Getting a personal loan becomes harder in 2020 but there are options available
Since April, getting accepted for a personal loan has become significantly harder, as lenders restricted lending to protect themselves from the risk of rising unemployment and a worsening economy due to the Coronavirus pandemic. Amigo Loans publicly removed themselves from the market, only accepting applications from key workers in emergency situations, while other lenders have either temporarily paused applications or restricted lending.
A secured loan is an alternative and approvals are rising
Lenders are starting to approve more secured loans, with month-on-month increases in the number of new agreements in June and July 2020. The Finance and Leasing Association (FLA) has reported new cases have reached 966, equivalent to £40m of loans in July, up from the low seen in May of £21m of loans approved. A secured loan requires the borrower to use an asset, usually a property they own either with or without a mortgage, as security for the amount they want to borrow. This gives the lender more confidence to issue the loan as they have a clear way to get their money back should the borrower not be able to repay them.
Those wanting to be accepted for a secured loan will need to show the lender that they can afford the required repayments in addition to any existing mortgage payments or other debts they are repaying. They will also need enough equity in their own home, usually at least 25%. The borrower’s credit score is important for a secured loan, but unlike a personal loan it is not the most significant factor due to the lender having the additional security. It is therefore possible for the same borrower to be accepted for a secured loan and refused a personal loan. Borrowers should always remember that their property is at risk if they cannot keep up the repayments on their secured loan.
Secured loans start from £3,000 although the interest rates at this loan level are significantly higher than those borrowing larger sums such as £10,000 and £20,000.
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