Earlier this month, the Bank of England cut the bank rate to 4.25%. In the time since, you may have seen the savings rates available on savings accounts and Cash ISAs following the move lower. So, with the best savings rates on offer continuing to fall, what are your options?
Stocks and Shares
Traditionally, those looking to generate strong returns for long term investments would turn to the stock market. Over the last 20 years the FTSE100 has risen by an annualised average of around 5% per year, underperforming the S&P 500 annualised returns of just over 10%.
The stock market continues to provide an opportunity for investment, whether you elect to invest in ETFs that include the entire FTSES&P 500, other indicies or pick your own stocks. However, there are some headwinds facing the markets that should give investors pause for thought: the volatility created by the Trump administration and the impact of the ongoing war between Russia and Ukraine.
Trump has already demonstrated that he is happy to inflict pain on the financial markets with his “Liberation Day” tariffs imposed on every country around the world. Over the last month the S&P 500 has seen its value drop by 12% before recovering much of its value a few weeks later as Trump paused much of his tariffs, and he walked back from the precipice of a trade war with China.
The impact of the Russia-Ukraine War continues to be felt on markets across the world as Western countries impose restrictions on Russian goods, services, and most critically fossil fuels. Russia is the world’s second largest oil and gas exporter, so when the availability of its fossil fuels are restricted that can have a major impact on prices which reverberate around various other areas of the economy. Since the outbreak of the war, European nations have faced much higher energy prices for homes and businesses, with the UK particularly badly affected.
Over the long term, stocks and shares may well continue the trends from the last few decades, and if you invest through a stocks and shares ISA your investments will be protected from the taxman. However, in the short and medium term, certainly under a Trump presidency, volatility is to be expected.
Premium Bonds
Premium Bonds are offered by the government via NS&I and offer investors the possibility of winning £1 million in a monthly prize draw. There are two million-pound winners every month, with millions more prizes of various values all the way down to £25.
Unlike a traditional lottery where your stake is being gambled, with Premium Bonds your stake remains secure and the interest is gambled and so whilst you will not always win, you will not lose your investment.
If you look at the average annual prize fund rate, your return should be around 3.8% although this includes the long shot chance of winning a £1million prize. Any winnings are tax-free, but this rate is lower than the rates offered by savings accounts and Cash ISAs and this figure is an average – you may earn more or less. Nonetheless, you get the excitement of gambling, but without the risk and so Premium Bonds are often a popular choice for people to put their money in outside of a bank.
Buy-to-Let Property (BTL)
For those with sufficient capital for a deposit, buy-to-let mortgages have long offered investors a way to generate yields that beat the markets. However, the situation has changed in recent years, with many buy-to-let investors exiting the sector and the decline of the buy-to-let empire.
Part of the problem has been higher mortgage rates, which have squeezed profit margins, but the main issue has been the increasing burden of taxation, regulatory pressures, and ageing housing stock that needs ever more spent on upkeep.
After all the various costs associated with privately finding a tenant and renting out a property in 2025, for BTL landlords with one or two properties it has become incredibly difficult to turn a profit.
Supported Living Property with Housemartin
Property remains a strong asset class in the UK. The fact that house-building has not met its targets in decades means that demand continues to significantly outstrip supply and that has a positive impact on house prices.
Despite high mortgage rates and increased red tape making the BTL sector less attractive to individual investors, the property market remains an attractive investment opportunity.
Housemartin offers investors the opportunity to gain exposure to the property market without the hassle of becoming a landlord. Investors are paid monthly from their investments, with yields often greater than 7%, as well as enjoying their share of any house price rises (or falls) when a property is sold. Housemartin takes care of the rest, from renovating the properties to finding the tenants.
What makes Housemartin different from other P2P property platforms is that Housemartin does not lend to third parties and focuses on the supported living sector. The company leases the properties to charities, housing associations, and other groups that need properties for those they support, including vulnerable people and those with disabilities. This means the rent is often backed by central or local government funding and the leases tend to be for longer periods, generally between five and 15 years. These long-term leases are inflation-linked and include internal repairing clauses, where the tenant is responsible for much of the upkeep and maintenance of the property.
All of this means that you as an investor benefit from long and more stable leases, which rise in value with inflation, and you are not responsible for the maintenance of a property the way BTL investors are. Housemartin also offers the opportunity to invest via an ISA, which protects your income from your investments from HMRC – something that is never available to BTL investors.
Cryptocurrencies
Cryptocurrencies had a moment in 2020. As millions stayed at home and picked up a cheque from furlough, many people decided to gamble on the crypto markets and it pushed these intangible assets into the mainstream.
Cryptocurrencies like Bitcoin, Ethereum, Solana, and more doubled or tripled their value and retail investors got excited that this could be an “easy” path to riches. However, as the real world resumed in 2022 and a few major fraud cases hit the headlines, the markets collapsed and millions of people lost money.
The value of any investment can fall, but as cryptocurrencies are based on hype and not a stake in a real company, property, or other tangible asset the volatility can be dramatic. On a good day, a cryptocurrency may increase in value by 5% or more, but at the same time it could fall by just as much in a matter of hours.
A Final Thought
You don’t have to restrict yourself to just one type of savings or investment. Whether you have £100 or £1 million to invest, diversification should be an important part of your investment strategy. And where possible, remember to invest through ISAs, so that your returns will be protected from HMRC, whether that is a Cash ISA, a Stock and Shares ISA, or an Innovative Finance ISA (IFISA) like that offered by Housemartin.