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Interest Rates - Lower For Even Longer

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Bank of England base rates here in the UK are likely to stay “lower for longer”, as the phrase goes. Indeed, they are likely to be unchanged at 0.5% in this calendar year and market expectations on balance are now for a reduction. Interest rates in Japan and certain European countries are now negative, in other words commercial banks have to pay the Central Bank for depositing money with them. This is marvellous news for borrowers but not for savers.


What alternatives are there for savers who are earning next to nothing on their bank and building society accounts?


For those who cannot stomach the rocky ride that is frequently a part of life in the share or equity markets, a conservatively managed bond or fixed interest portfolio might be the answer and we can provide it. While UK Government bonds’ (gilts) redemption yields are around the 1% to 2% area depending on dates to maturity, corporate bonds, depending on their quality, yield from 3% to 6%. However, although bond prices generally are less volatile than share or equity prices, they do move in price both down and up. They have done this in the past and they will do so in the future. Hence an all bond portfolio is not a substitute for cash on just a six month or twelve month view.

Longer time horizons should be the norm in order to give a portfolio time to “work”.

Please contact us to speak to a member of our Investments & Wealth Planning Team


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