To fix, or not to fix?

Aged

My 1 year fixed rate ISA is about to mature, and I'm slightly tempted by some of the 5 year fixed rates that are available (such as Gatehouse Bank 1.3%). There seems little point in fixing for any less than 5 years with the paltry rates on offer, so the only other alternative is to opt for easy-access and hope things will pick up soon. Anyone else in the same predicament?

masonic

I suppose it depends on whether you think interest rates will average less than 1.3% over the next 5 years. I think it is fairly likely that inflation will not average less than 1.3% over the next 5 years, and will likely be ahead of interest rates for most of that period, so you will likely see your balance eroded in real terms whatever you decide.

A 1 year interestprofit penalty, when the rate is as low as 1.3%, is not a huge price to pay if rates shoot up and you wish to re-fix at a better rate.