Fixed term deposit (bond?) has matured. What should we do with it?

[ImpYCelyn]

We had a 3 year fixed term deposit. It's just matured, and know we're not sure what to do with the money.

Obviously there are 101 things we could actually do with it, it's not a huge sum and we're not rich, but we're not sure what would be the most sensible thing to do with it.

Should we put it back in a bond? Maybe a 1 year one? Or should we split it and put it in our ISAs? Which have a worse interest rate. Should we pay off a chunk of the mortgage (it's only just started)? We probably can't pay a lump sum, but we have the option to change our repayments, so we could pay double for a while. I'm worried that we might need a lump sum one day though.

Any advice would be very gratefully received, thank you!

You could put it in another bond. Pity actually, because National Savings up until a few weeks ago had a nice 5 year inflation+ bond on offer, and withdrew it because it was so popular! If you go to www.thisismoney.co.uk they have league tables of the best bonds and other savings options. You could take out a better-paying ISA with the money. Some are offering 3%+ if you're happy with various conditions. If you have debts costing you more than 3% think about paying those off. And if your mortgage is costing more than 3% and you can pay something off without a penalty, that's worth considering....

If you wanted to go a little riskier you could think about unit trusts or a Stocks and Shares ISA. The market is very low at the moment and if you choose carefully it could pay off long-term.

I like to keep something 'instant access' just in case there's an emergency. Having once had a central heating boiler condemned and having to find £2k to replace it, I don't like everything being tied up in property or long-term investments. HTH

Thanks very much Cogito, I'm going to look at that link now.

I've been doing a lot of reading today. I think I'm going to move my ISA to a higher rate one (I'm at 2.5%, so I can get more), and then we're going to top that up to hold 3-4 months salary.

The mortgage rate is over 4.25% so with the rest I think we'll increase our repayments for a while.

As much as I'd love to be daring with the money we're just not in a position to risk it at the moment.

Thanks very much for your advice.

Increasing repayments is definitely worth it. If you reduce the term of your mortgage by just a few months the amount you stand to save in interest can be impressive.

If you have any other debts (like credit cards) with high interest rates think about paying them off as well. But do leave yourself a rainy day fund!

We have no other debts thankfully (well apart from my student loan, but all the advice says don't bother paying it off).

I'm hoping we'll be able to know a few months of it in the end by increasing the repayments in the short term. Our broker told us that even if we could pay off an extra £10-20 per month it would be worth it, so hopefully it'll make a little dent at least.

Thanks again.

Rubbish typing, sorry.

"I'm hoping we'll be able to knock a few months off it..."