Buying a house by end of year, should I still put my cash into my fixed ISA?

ellie27

I currently have £27,000 in Santander 2 year fixed major ISA - 4.1% (started last year)

I am about to put in this years £5760 but ..........

We are going to be moving house, hopefully, by the end of the year and I will be using some of the ISA as deposit.

For a withdrawal, penalty is that you must close the account and you get charged the equivalent of 120 days interest.

Should I still go ahead and put in this years £5760? Would I be best put it into an easy access ISA which pays interest montly/no charge for closure, but much lower rate?

I think it makes sense just to put the money in my ISA above, but just checking!!

anna42hmr

ellie27 wrote: »

I currently have £27,000 in Santander 2 year fixed major ISA - 4.1% (started last year)

I am about to put in this years £5760 but ..........

We are going to be moving house, hopefully, by the end of the year and I will be using some of the ISA as deposit.

For a withdrawal, penalty is that you must close the account and you get charged the equivalent of 120 days interest.

Should I still go ahead and put in this years £5760? Would I be best put it into an easy access ISA which pays interest montly/no charge for closure, but much lower rate?

I think it makes sense just to put the money in my ISA above, but just checking!!

If you are happy to loose 1/3 of your interest then that's fine, but I would do your sums first before you go ahead

Whilst a higher rate of interest looks better than a lower one, loosing a third of the interest could eat into the difference and may mean you actually earn less than you would have done if for example you put the money into Santanders 2.5% Isa for example

so for instance if you paid the money in and only had it in the account for 200 days, due to the penalty you would only get interest on the account for 80 days was in there (200 days less the 120 day penalty)

as a rough example 5670/100 x4.1 =236.16 /365 days = 0.65 interest per day x 80 days = £52 interest however if you were to pay in to a Santander 2.5 isa (5760/100 x 2.5 = 144. / 365 days = 0.39 per day, x 200 days in the account = 78.

so on that example whilst the interest rate is higher on the fixed rate of 4.1 if you were to leave the money in the same account for 200 days you would loose out due to the penalty (£52 vs £78) whilst it isn't much its something you need to consider. I would suggest you calculate the difference between for example if you were to withdraw after 90 days, 100 days, 300 days etc and see what comes out better for you.

System

ellie27 wrote: »

I currently have £27,000 in Santander 2 year fixed major ISA - 4.1% (started last year)

I am about to put in this years £5760 but ..........

We are going to be moving house, hopefully, by the end of the year and I will be using some of the ISA as deposit.

For a withdrawal, penalty is that you must close the account and you get charged the equivalent of 120 days interest.

Should I still go ahead and put in this years £5760? Would I be best put it into an easy access ISA which pays interest montly/no charge for closure, but much lower rate?

I think it makes sense just to put the money in my ISA above, but just checking!!

Put it in an easy access account. No point in fixing if you will be taking the money out as you will lose most of the interest you have accrued. I don't think you would be able to add any more to your fixed rate in any case as they don't normally allow any additional deposits.

How much will you be putting down as a deposit? If its the whole amount I wouldn't put ANY into an ISA this year as you will use up your allowance. I would wait until after you have bought your house and then add what you can to an ISA before 6/4/14.

ellie27

anna42hmr wrote: »

If you are happy to loose 1/3 of your interest then that's fine, but I would do your sums first before you go ahead

Whilst a higher rate of interest looks better than a lower one, loosing a third of the interest could eat into the difference and may mean you actually earn less than you would have done if for example you put the money into Santanders 2.5% Isa for example

Yes, I was hoping someone would be able to do the sums for me and let me know what would be the best assuming I closed the isa 6 months before the 2 yr maturity date

anna42hmr

ellie27 wrote: »

Yes, I was hoping someone would be able to do the sums for me and let me know what would be the best assuming I closed the isa 6 months before the 2 yr maturity date

have edited my response with a rough calculation based on withdrawing after 200 days but you may need to sit and do other options.

innovate

You can't put any new money into the 2 year fixed one that you opened last year, anyway.

As an aside, it is 4% AER, not 4.1%. There is a 0.1% bonus because Rory won a major, but it is not expressed as AER and doesn't get calculated like your normal interest does.