ISA: Fixed for 5 years or not??

anders170

Hi,
I want to put £4500 into an ISA, but Im not sure whether to go for a 5 year fixed rate at 4.2% or an easy access one at 3%. I wont need the money until I retire in 20 years. Does anyone have any advice?

MoneySaverLog

Anything can happen in 5 years, rates could go up and then you're stuffed. Cause of this I decided to fix for 2 years instead.

RobStaffs

There are some very good rates around for 2 years and three years.Particulary Halifax and Santander..I think Halifax are doing 4.25% for three years and Santander as much as 4.1% for 2 years.A lot can happen in the next few years.Savings rates must go up at some point.

StevieJ

RobStaffs wrote: »

There are some very good rates around for 2 years and three years.Particulary Halifax and Santander..I think Halifax are doing 4.25% for three years and Santander as much as 4.1% for 2 years.A lot can happen in the next few years.Savings rates must go up at some point.

The problem with Halifax is t&c changes which make it far more punitive to cash in a long term fixed rate early than was previously the case. There is now a 365 day interest rate penalty if you need the cash early (5year fixed), last year I signed up with Coventry 4/5 year, paying 5% with much lower penalty (I think 120 days). So keep an eye on those penalty clauses if you sign up long term fixed.

london2008

I don't need access to mine for ages either, but I never lock away for longer than a year, so I transfer to a better rate every year. I managed to get 3.35% with Aldermore, the rate is now 3.15%. Come the 6 April I will look for the best easy access rate and then next year move it all again to another provided in one ISA. I try and keep them together so I don't forget about the money.

For me, I personally feel five years is too long. I would, if the rate was amazing lock for two, but nothing more.

Just my two pence worth. All the best.

Lokolo_2

I too am looking at fixing for 5 years to get the best rate, however I'm not too impressed with Halifax's 5 year one at 4.5%, last year more were around the 5% mark and now it seems 4.5% is the best, it looks meagre when compared to a 2yr 4.2% for example!

Mickygg

A lot of people say they are prepared to move their money every year. I personally don't chose this option any more as if interest rates stay low you miss out on extra interest. I kick myself 2 years ago for not fixing for 5 years at 5% due to people saying it was too long. However as above says 4.2% isn't great to fix for 5 years, chose Halifax instead at 4.5% or a safer bet would be 2 years fix at 4%.
Another factor is can you or will you move money about every 1 or 2 years. I now don't want to do this each year as I know there will be a year I forget and then be getting a rubbish 0.5%, so for this reason locking away for 5 years if you defo don't need access to cash is a good idea. But you may as well do this at the highest available 4.5%.

MoneySaverLog

Forget??? The reputable banks will write out to remind you, or if you have outlook calender you could set up a reminder there, or do everthing around the tax year with all the publicity around that time of year it's bound to remind you to move your ISA.

ses6jwg

My gut feeling is 2 years maximum at the moment.

The 2 year deals are almost paying the same as a 5 year deal.

DreamerV

ses6jwg wrote: »

My gut feeling is 2 years maximum at the moment.

The 2 year deals are almost paying the same as a 5 year deal.

I second this. I've tied in various deals between 1 year and 4 years for a difference of around 0.4%. This makes no sense (although less than 5% of my money is tied up for 4 years) as rates are likely to rise at some point and unlikely to fall from their already paltry rates - so the extra 0.4% is negligible compared to what I could gain in a couple of years due to rising interest rates.

Looking at my finances now, they'd have to offer something rather spectacular for me to be tied in for 5 years. I have tied in previously for 5 years but this was at the height of the recession for 5%, and I think that was a wise investment. I wouldn't tie in for 5% for 5 years now though.

Just to note, I won't be needing this money (touch wood) for 27 years. (I think I may need to go ask advice on more sensible places to invest my money for the longer term, as may you - as far as I can tell from these boards, people seems to think s&s isas are better for retirement planning rather than cash - but don't quote me on that!)

Lokolo_2

Although the 5yr Fixed ISA rates aren't great, they're still better than the 2/3yr ones, and there is the possiblity of interest rates remaining as they currently are.

As some savers have said before, the safest bet may be having a 5yr FRISA every year so that you eventually have one maturing every year and can transfer it into the highest paying 5yr FRISA again to keep taking advantage of the highest rates.

I myself have details of all my savings accounts in a simple Notepad file, not details like account number, but details like when the account was opened and when it will reach the end of its term and the amount in there. This helps to easily keep track of accounts!