Interest Rate Hikes Raise Yield Bar – Plus Loan Offer Latest
The conventional wisdom – ie, widely accepted foolishness – is that we in the UK are hurtling back to the 1970s. Economic stagnation, coupled with inflation and general discontent are certainly on the scene. And now, after years of pretty much non-existent returns, cash deposit savers are getting a break, with new accounts offering some chunky yields.
We’ve blogged elsewhere about how a rising tide of interest rates will float cash deposit accounts and be beneficial for different products (without safety nets) such as peer-to-peer (P2P) accounts.
Meanwhile our friends at Altfi bring the latest cash-deposit news.
As both inflation and interest rates rise, digital bank Monument has increased the headline rates it pays on its 2-year and 5-year fixed savings accounts.
Launched in December the accounts originally launched at 1.5 per cent and 2.05 per cent respectively, today those rates sit at 2.95 and 3.05 per cent, which Monument says place them second in the best buy tables.
Unfortunately, the rates are only for Monument customers, who must have a balance of at least £25,000 in order to open an account, part of the bank’s aim to capture the mass affluent customers.
“We’re pleased to be introducing our new fixed-term deposit accounts to the market, offering competitive rates for savers who wish to make their money work harder for them,” said Monument’s chief commercial officer John Saunders.
“Fixed-term deposit accounts are ideal to complement longer-term savings goals – such as saving for a wedding or a new home – and allows savers to benefit from higher interest rates than those typically offered by easy access accounts, and make their money go further.”
In January Monument co-founder Mintoo Bhandari handed over his CEO role to ex-Barclays boss Ian Rand who is coming to scale-up the business.
Monument was granted its unrestricted banking licence in November, launching into the market shortly afterwards.
Loan Offer Latest
A loan offer from Harris & Co., a borrower that operates in the litigation claim sector, is available on site. The loan is risk-rated A by our credit committee. It has a gross yield of eight per cent, for a fixed term of 12 months. The loan offer is currently 26 per cent subscribed, and will close when filled.
For more detail, login or register here.
Historical Performance And IFISA Process Guide
- Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee).
That figure is the result of over £24 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
- Money&Co. has been lending for over 7 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
- Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
- Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
- Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.
The ISA allowance for 2020/21 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.