Isa Interest (A&L)

masonic

lisyloo wrote:

You are right that there is an incentive to move end of April but there may be a case for moving before that.

There might be an incentive for moving before that, but even if there were, I still would move there and then. I will be holding out for something better. I cannot imagine there being an account available in the coming weeks that will not still be available in April.

In the end, I'd rather lose out on a couple of months interest at slightly more than I am currently getting in view of the possibility that things will change and I might save my money from spending considerably more time in an account paying slightly less than I could have earned. That might happen in the future anyway, but at that stage there would be nothing I could reasonably have done to avoid it.

I can understand some people feeling that it's better to just get it over and done with, but I will be holding out as long as I feel I can. My only dilemma is choosing my time in view of my desire to avoid 'moving with the herd'.

lisyloo

There are pros and cons.

My own educated guess is that A&L won't raise their rate because it's a closed account.
Therefore you will be 0.25% worse off (probably) with A&L that movng to a lender that DOES put up rates.
So following my specualtion and your strategy you will be 0.25% worse off for 3 or 4 months.
This is unlikely to make a huge difference unless you have a really large ISA.

How much you switch depends on how large your ISA is and how much time you have on your hands.

Personally I always translate the difference into cash.
I generally can't be bothered for less than £30 per year because of all the hassle involved (plus loss of interest whilst the cheque is in the post).

It's a trade-off but my guess is that A&L will become less competitive over the next few months as they don't raise rates and others do.
The rise in January was one month sooner that I (and most people) expected so it will be uncompetitive for one month longer now.

masonic

lisyloo wrote:

Personally I always translate the difference into cash.

On 0.25% difference for 3 months (say, end of Jan-end of Apr), I calculate that difference as £7.50. I calculate the cost of transferring (based on a 2-10 day delay between my money being witdrawn and credited) to be anywhere from £3.50-£17.50. I think those figures really speak for themselves.

lisyloo

Agreed.
This is exactly why I do the calculation.

It is obviously different depending on the capital amount making it more worthwhile to switch if you have a large amount of capital (some people transfered TESSAs and you can have a very big sum if you did the maximum every year).

masonic

lisyloo wrote:

My own educated guess is that A&L won't raise their rate because it's a closed account.

Just thought I'd add, that actually it is not a closed issue account. You just can't get it with the bonus anymore. If A&L decide to raise the rate of the open issue Direct ISA currently paying 4.75%, the one with the bonus paying 5.45% will also go up. I know they didn't raise it last time, but they did the time before. It's anyones guess what they are planning this time, though. They could completely close this one and launch another issue of this account in time for April.

masonic

lisyloo wrote:

It is obviously different depending on the capital amount making it more worthwhile to switch if you have a large amount of capital (some people transfered TESSAs and you can have a very big sum if you did the maximum every year).

Yes, but if you weigh the loss of holding on to a not-so-great account for a few months against the cost of transferring plus the cost of getting it wrong in the longer term, I think you will always come to the same conclusion. The benefits and costs increase proportionally. If transferring early might leave you out of pocket (compared with waiting until there is a compelling reason to transfer), it will do whatever the amount invested.

YorkshireBoy

In November last year, they had 3 choices...

1. Launch a Direct ISA 3, paying (say) 5%

2. Lift the Direct ISA 2 rate to 5% (and hence pay 5.70% to the bonus holders)

3. Do nothing.

Since they chose option 3 last time, it's highly unlikely they'll do the same again - especially since that would mean they had a product which was a full 0.5% below BOE rates.

Last time, my money was on option 1. However, because we're only 3 months away from the end of the bonus period, and to save on admin, this time my money's on option 2.

Anybody agree?

masonic

YorkshireBoy wrote:

Anybody agree?

Yes, but the options are not all mutually exclusive (or am I being a little too sanguine? ).

lisyloo

plus the cost of getting it wrong in the longer term

I agree with most of your points masonic, however this is where we disagree.
If I got it wrong and felt that this would affect me long term I would simply switch again.

I am not saying that I would aim to be in the posistion of switching all the time BUT if I had got it badly wrong and it was worthwhile then surely the answer is simply to move again.

Some accounts do guarantee no loss of interest on transfer (although they might not be the highest paying ones).
I believe Halifax are one such company.
Therefore the only equation is your time over the gain.
Personally I wouldn't consider it worthwhile for a few quid but there may be people with plenty of time on their hands who are poor who might consider it worthwhile.

masonic

lisyloo wrote:

I agree with most of your points masonic, however this is where we disagree.
If I got it wrong and felt that this would affect me long term I would simply switch again.

I am not saying that I would aim to be in the posistion of switching all the time BUT if I had got it badly wrong and it was worthwhile then surely the answer is simply to move again.

I understand your point, but using my original figures above, if it is a choice between possibly losing £7.50 by staying put for a few months (then £3.50-£17.50 by switching once and once only), or losing £7.00-£35.00 (not to mention going through additional hassle) by switching twice, then I would always go for the former (I realise that is a false dichotomy, btw ).

Essentially, if you did get it wrong, then you almost certainly would have been better off had you not switched in the first place; that would no longer be the case when the rate drops by 0.9%.