1 Month
Ask Rachel
Working in the financial industry for over 30 years, Rachel Thrussell is the leading independent expert on UK savings products. Her views are constantly in demand from both the industry and the press.
I have looked at a comparison site that shows fixed term ISA rates paying a much higher rate than in your fixed rate ISA chart. They seem too good to be true. Have you any advice about these types of investment?
There are several fixed term ISAs available that claim to offer much higher rates than standard fixed rate ISAs, sometimes up to 8%, but you’re right in thinking that these rates seem too good to be true – they tend to be investment or innovative ISAs, rather than cash-based savings accounts, and the level of risk heightens accordingly. These accounts boast such high rates because they invest your savings in higher-risk enterprises, such as funding corporate loans, buy-to-let mortgages or peer-to-peer loans. Because of the higher risk involved, there’s no guarantee – if the end customer defaults on their loan and the company is unable to recover the funds, there’s the chance you could lose your investment. These firms aren’t covered by the Financial Services Compensation Scheme either, so if that were to happen, there wouldn’t be any recourse.
This week's
average rates
| No Notice | 0.22% |
| Notice | 0.52% |
| Cash ISA | 0.56% |
| 1 Year Fixed Rate Bond | 0.63% |
| 2 Year Fixed Rate Bond | 0.75% |
| 3 Year Fixed Rate Bond | 0.88% |
| 4 Year Fixed Rate Bond | 0.98% |
| 5 Year Fixed Rate Bond | 1.06% |
| 27 October 2020 | |
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Alternative sources of income
Should you consider a commercial property conversion investment?
Changes to planning regulations last month mean that it is now easier to convert a commercial property into a residential one. This change, combined with the fact that many commercial landlords are struggling to find business tenants and the continuing residential housing crisis, means that buying a commercial property and converting it into a residential one could be a good investment opportunity.
The new rules have removed the need to gain planning permission to turn vacant commercial properties, such as shops, into residential properties. As well as this, builders will no longer need the normal planning application to demolish and rebuild vacant and redundant residential and commercial buildings if they are rebuilt as homes.
The next 12 months could be a great opportunity to buy commercial properties, as the Coronavirus pandemic has accelerated the trend that has seen shoppers move from high street shopping to online shopping. This has resulted in many city centre shops closing down and landlords struggling to find new businesses to lease the property. As a result of this, it is forecast that the price of commercial buildings will fall. For example, in its Fiscal sustainability report, the Office for Budget Responsibility, stated: “In our central scenario, commercial property prices are assumed to fall by 13.8% in 2020-21 and to rise slowly thereafter leaving them 5.5% lower at the scenario horizon than in our March forecast.”
For those considering investing in the conversion of a commercial property to a residential home, a bridging loan will likely be the best funding option as banks are unlikely to be willing to offer either a commercial or residential mortgage. In fact, the bridging industry is expecting this type of investment to be a huge growth area in the coming years.
Investors should be aware that converting a commercial property into a residential one comes with considerable risk. For example, investors will still need to gain approval from the local council to carry out the conversion. To get this approval, investors will need to contact a building control body (BCB), which can be done through the council, to ensure the work complies with building regulations. More information about building regulation approval can be found on the Government website.
Once the conversion has taken place, the investor also has the risk of not being able to sell the property or attracting tenants. In addition, this is a very hands-on investment, where the investor will need to oversee the project and will involve investing time as well as money.
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