Off too work on my tan so will update any of the databases that go out of date on my return.

After a number of requests i have re-added the spinning lady brain test to the quiz page. For those of you who have never tried it do you know which side of the brain you use?

With RPI hitting 5% in July 2008 and forecast to rise further i thought it was time to revisit what accounts allow a real positive return and it is not good.

 

RPI at 5% means a basic rate tax payer needs a gross return of 6.25% and a 40% taxpayer needs 8.33%. If you are not getting these rates on your current savings accounts your savings are losing value in real terms. Even many ISA's are paying less than 5% so also bad news.

 

The best of the bunch for ISA's is the Market Harborough Building Society paying 6.5% on £3600 minimum. If you don't have that amount consider the HSBC ISA paying 6.25% on minimum £1.

 

The best of the fixed rate bonds both require a minimum of £1000 and are ICICI 7.2% and National Counties Building Society paying 7.11% (launches Monday 18/08/2008. These will give inflation beating returns for a standard tax payer but not if you pay 40%.

 

For fully regulated regular saver accounts the best are Darlington Building Society requiring a minimum of £50 per month paying 8% and the Chorley Building Society santa Saver paying 8.25%. Great for a basic tax payer but not so good if you are a higher rate tax payer.

 

The Government backed NS&I savings certificates pay 1% plus the RPI over 3 years or five years-or 6% this is equivalent to 10% for a higher rate tax payer so well worth considering if you can afford to lock your money up for that time.

 

Two others but with greater risk are the Halifax International regular saver paying 10% but as it is offshore if disaster strikes you are not fully protected and Zopa, Zopa again has greater risk although i use it and currently over the last couple of months an estimated return of 10% after anticipated bad debts and fees is feasible. (again you are locking some of your money up for 3 or 5 years) If zopa interests you i blogged about it previously.

 

One final thought is that the Bank of England forecasts RPI tumbling next year and with swap rates falling it is unlikely many of the higher rate fixed rate bonds will be around much longer so might be worth grabbing one while they are still available.

Having previously discussed how Retail Price Inflation is eroding the value of savings for many 40% tax payers it is disappointing to see RPI rise to 5% today. For anyone who has not read my previous discussion on how to try to mitigate against it please read my blog entitled "Inflation Busting Savings Accounts" dated 31/07/2008 for details of some of the accounts that are worth considering.

Zopa UK have today announced on the lenders weekly email that they have had the best week for disbursals ever with £380,400 lent out.

Also 30 loans have already been completed in the new young markets. Finally for me it was a good week too as my average loan on ZOPA was 12.89% after the lenders fee.

I have been investing in zopa for about 12 months so thought i would give my thoughts on it as it follows on nicely i think from the inflation busting savings article.

Firstly what is zopa? Zopa – the Zone Of Possible Agreement – cuts out the middleman by putting lenders and borrowers directly in touch. The site, which acts as a facilitator and makes sure debts are repaid, has grown to over  200,000 members.Zopa is the world’s first marketplace where people can go to lend or borrow money from or to each other, cutting out the need for banks, offering more clarity and often better interest rates than more traditional methods of lending.

How does it work.  Anyone can lend money but only someone who has been credit checked can borrow money. At Zopa you lend into a particular market. Markets are defined by the credit rating of borrowers (Market A, Market B etc.)A*-rated borrowers are more creditworthy than A-rated borrowers; A-rated borrowers are more creditworthy than B-rated borrowers; and B-rated borrowers are more creditworthy than C-rated borrowers, and the term of the loan (36 months, 60 months ) When you place money in a Zopa market, your money is lent in separate contracts of £10 each to at least 50 borrowers. Your offers, together with those of all the other lenders in a market are ranked, firstly by the rate lenders have set (lowest to highest) and secondly by the time the offer was placed in the market (earliest to latest). A new y market has also been launched for people aged betweeb 20-25. Borrowers can borrow anything between £1000 and £15,000.

At the end of 2007 a second way of lending/borrowing was launched called Zopa listings

Borrowers write profiles of themselves, explaining why they want to borrow, why people should lend to them and what rate they're looking for and Lenders can then choose whether they want to lend to them. And if they decide they do, they select how much and at what rate.
It's a more engaging, more human way of lending and borrowing.

The rub though as with everything is whether the return on Zopa is worthwhile....well to date i am averaging just over 9.20% after the zopa lending fee but before bad debts so yes i think it is. I have not had a bad debt yet and to date Zopa have lent out over 23 millions pounds and the bad debt level is less than 0.2% so even if my bad debt levels are as per the zopa figures so far i would still be getting a return of over 9%. This figure is always going to be slightly over inflated as any funds in the zopa holding account only earn the bank of England base rate less 0.75% and repayments are delayed over the weekend. Over time i hope to increase the rate after fees to nearer 9.5% so this should guarantee at least 9% after everything.

Below are some typical rates i offer at nowadays and the expected returns they give after zopa fees and projected bad debt.

A36* Gross 11% Estimated return 10%

B60 Gross 12.1% Estimated return 10%

C36 Gross 14.3% Estimated return 10%

Y60 Gross 13.4% Estimated return 10%