Best long-term fixed rate cash ISA?

Reed_Richards wrote: »

Martin does not cover fixed rate cash ISAs for periods longer than 3 years, but you can get better rates if you are prepared to tie up your money for longer.

It is a little more complex than that as cash ISAs, even fixed rate ones, can always be transferred. It is just that the penalty for transferring a fixed rate cash ISA before maturity varies between providers.

For the Nationwide BS 5 year ISA 4.5% the penalty is 365 days interest on total amount. (must be closed/transferred in full) :eek:

For the Principality BS 3 year 4.2% it is 270 days interest on total amount. (must be closed/transferred in full)

For the Yorkshire BS 3 year 3.75% it is 180 days interest on total amount. (must be closed/transferred in full)
http://www.ybs.co.uk/savings/taxfree/fixed_rate_isa.html

For the Leeds BS 3 year 3.5% it is instant access for the first 25% of the original amount and 120 days interest for whatever you withdraw/transfer of the remainder. (i.e. account does not need to be closed/transferred in full)
http://www.leedsbuildingsociety.co.uk/savings/fixedrateisa3year.html
The rates here were better but dropped only recently

In the case of the Leeds BS you can use it like an instant access ISA if you want for up to 25% of total and if rates do increase you can decide how much to transfer elsewhere which is much more flexible than most other fixed rate ISAs.

ses6jwg wrote: »

Why would you tie your money up for 5 or even 3 years?

With interest rates at 0.5% the only way realistically is UP.

Especially if inflation takes off the interest rates will be hiked to catch up.

Suddenly your 5 year fix might not look so competitive and in most cases you are stuck with it.

That's a different question and here is my opinion on the subject.

For a start there are 3 possible moves in base rate.
Base rate, now 0.5%, can
a) fall to 0.25% - highly unlikely now
b) stay the same - very likely as no real evidence of recovery
c) rise - economic suicide at present

If, as you suggest, base rate was increased before economic recovery there would be large scale house repossessions and business failures.
Base rate will be staying where it is until the end of 2010 at the earliest.

Secondly, savings rates are detached from base rate. Banks and building societies offer rates to fund both their existing mortgages and their new ones. The first priority of building societies is to fund their existing mortgages and to do that they can offer higher fixed savings rates as those fixed rate mortgages were at higher rates. As those mortgages are redeemed the replacements will be at lower rate, either SVR or fixed, and so building societies will not be able to offer such high rates and still remain in business. Banks will offer rates as good as building societies or only slightly better to maximise their profits.
Savings rates, fixed and variable, will fall over time towards the base rate.