ISA fixed rates and withdrawal interest loss

Alp1ne

Am I missing something?
The best instant access ISAs are about 0.6% but you can get a 5 year ISA at 1.75% with only 180 days loss of interest.
Does that mean you only lose aprox half a year's interest? So you won't lose anything if you keep it in for a least a year and then are quids in the longer you keep in a 5 year fixed even though you can withdraw at anytime?

eskbanker

The facts are as stated in your post, but comparing easy access and fixed term isn't as simple as headline interest rates - if you're keeping the money in for at least a year then why would you be looking at easy access in the first place?  And signing up to a long term fixed rate makes it more expensive to jump to any better rates that come along during that time....

Malchester

I took out Shawbrook 7 Yr ISA at 1.25%. A few days after they withdrew the issue and brought out one paying 1.5%. Despite my protests they would move my money to it. Then West Brom BS had online 5 Yr ISA paying 2%. Reckoned, in long run, would be quids in taking interest loss on Shawbrook and switching it to the West Brom. So I did

eskbanker

Malchester said:

I took out Shawbrook 7 Yr ISA at 1.25%. A few days after they withdrew the issue and brought out one paying 1.5%. Despite my protests they would move my money to it.

Presumably that last sentence is missing an important 'not' to reverse its meaning?  If you were prepared to lock your money away for seven years, why would you expect to be able to move it within days, or do you mean that they wouldn't even do so while charging the interest penalty?

claire07

Checking my accounts I realise I have several Fixed Rate Isas taken out for 2/3 years at beginning of lockdown which are 0.55 and 0.60 Fixed.  I could transfer them to recent Fixed Rate Isas over 1.00% and by my reckoning it would be worth it with rates rising even after taking the penalty.  However is there something I am missing as this thread is the only I could find where anyone was considering doing this and I don't want to do anything stupid and regret it.

eskbanker

claire07 said:

Checking my accounts I realise I have several Fixed Rate Isas taken out for 2/3 years at beginning of lockdown which are 0.55 and 0.60 Fixed.  I could transfer them to recent Fixed Rate Isas over 1.00% and by my reckoning it would be worth it with rates rising even after taking the penalty.  However is there something I am missing as this thread is the only I could find where anyone was considering doing this and I don't want to do anything stupid and regret it.

It's mentioned occasionally but not particularly regularly - the main MSE cash ISA article used to suggest signing up to fixed rate cash ISAs in the knowledge that the cash must be accessible and that the penalty is sometimes worth taking, but cash ISAs in general aren't a particularly good place for many to put their money anymore, so there's correspondingly less discussion about them.

But nothing to stop you doing that, just do the maths....

Malchester

I did this recently from Shawbrook  7yr ISA paying 1.25% to West Brom 5 Yr ISA paying 2%. Just after I opened the Shawbrook account they increased the rate on the account but it was just too late to cancel and they refused to pay me the increased rate. So I transferred to West Bromwich Building Society who had a short lived online ISA paying 5 %. Lost interest but will more than make it up in time 

claire07

That's great.  Many thanks to you both for replying.  I have treble checked the maths and will go ahead and switch.  I have just got so used to rates only going down it took me quite a while to realise it would be worth taking the penalty hit and knowing it would still be worth doing.