ISA: Fixed for 5 years or not??

Stompa

StevieJ wrote: »

So keep an eye on those penalty clauses if you sign up long term fixed.

I agree, you never know what the future holds. It's beyond me why people ever choose accounts which don't allow early withdrawal or closure, when there's almost always a similar alternative that does.

Mickygg

MoneySaverLog wrote: »

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.

Absolutely I may forget. One year I did just that. Life can get in the way rather than being glued to the computer.

Lokolo_2

Mickygg wrote: »

Absolutely I may forget. One year I did just that. Life can get in the way rather than being glued to the computer.

Hardly being "glued to the computer"! A sensible plan is to update a log of account details every time you make a payment into your savings or every payday, that way you are frequently checking which accounts are due to mature soon! That takes all of 60 seconds out of my precious time!

Axion

As most people have said 2yrs is optimal, if you analyse the 1y forward rates (ie implied 1year rates starting in 1, 2, 3, and 4 years time) based upon the best fixed-rate isas currently available. The 2y fixed circa 4% comes up best.

If you don't need the cash, I personally see no reason to fix on the 1y rate, i dont see base rates rising in the next year, whilst commerical deposit rates i also dont see rising enough to compensate for the 1y/2y rate differential.

Nine_Lives

For anything that i may forget, i write it on a calendar in my room which is looked at regular.
For anything occurring in the following year gets written at the end of the calendar, so that when Dec ticks over to Jan, i then re-write it in the new calendar.
For a 2yr, i'd write at the end of Dec as a reminder, then at the end of Dec on next years calendar & then in 2014, i'd write on the specific date.

That way there's no forgetting.

s_b

2 years fixed at 4% is a reasonable amount of time because we have no way of knowing if interest rates will go dizzy in the near future
i wouldnt go for 5 years for an extra 1/2 a percent

bigfreddiel

DreamerV wrote: »

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.

well i'm not so sure

is 4.5% for 5 years a good deal

look at it this way

if instead you think rates will be going up in a year then tuck your money away for a year at say 3%
then you WILL need 5% for the next 4 years to beat 4.5% over 5 years

if rates don't move for 2 years then you'll be needing 5.6% for years 3, 4 and 5

and if things don't move for 3 years you'll be looking for 7% to beat the 4.5% deal for 5 years available right now

hope that helps

DreamerV

bigfreddiel wrote: »

well i'm not so sure

is 4.5% for 5 years a good deal

look at it this way

if instead you think rates will be going up in a year then tuck your money away for a year at say 3%
then you WILL need 5% for the next 4 years to beat 4.5% over 5 years

if rates don't move for 2 years then you'll be needing 5.6% for years 3, 4 and 5

and if things don't move for 3 years you'll be looking for 7% to beat the 4.5% deal for 5 years available right now

hope that helps

Fair point. Although I do think there will be 5%+ rates from next year or at the latest within 18 months, and the rates won't be coming back down from there for a while. So for me, it's worth the risk to tie things up for 18months at 3.5% in the hope of higher interest rates at maturity. However, I am working on gut instinct and opinion of only a few people, so it's possible rates won't rise, and that it would have been better to tie in at 4.5% for 5 yrs (which I did have the option to do but decided against). Will just need to wait it out and see

bigfreddiel

DreamerV wrote: »

Fair point. Although I do think there will be 5%+ rates from next year or at the latest within 18 months, and the rates won't be coming back down from there for a while.

well you're a brave person because rates won't be going up for another two years at least.

okay its just my opinion but i'm sure i'm right

fj

DreamerV

bigfreddiel wrote: »

well you're a brave person because rates won't be going up for another two years at least.

okay its just my opinion but i'm sure i'm right

fj

I wouldn't say brave. I'm generally risk-averse. I guess I'm semi-confident in so far as we're currently seeing up to 4.1% on a 2 year frisa, and things have improved since last year. Expectations are that things will get better (just a matter of at what pace). I'd expect at least similar (4%+ on a 2 yr fixed next yr as worst case scenario) which would mean I've lost out on little enough (0.5% from my max offer) not to worry about it. I think it's worth the risk of that little bit of loss, for the potential gain (1%+, although I realise from your post this will also have to make up for the lesser rate I had for the shorter term). Obviously I've taken a lot of different things into account, above all that I am currently a mature student, and I may not secure an immediate job next year, so having access to my money in the next 18months is ideal. At that point if I don't need it, and if rates haven't improved, I have a bit more time on my hands to think about s&s isas and other investment products (as if I don't need the money next year, I'm unlikely to need it until retirement in 28 years).

I like how you're so sure of your opinion Being so sure, seems like you could either win or lose big.