Fixed rate ISA's 5 May 2022 at 3:32PM in ISAs & tax-free savings 5 replies 276 views

jeansie7

I know that Martin is telling us to ditch the ISA but i have some good advice for those who do have them . I have just saved myself hundreds of pounds by switching my ISA's to a better rate. I had several fixed rate ISA's  that were not due to mature for at least another year. They were getting only 0.35% or 0.4 %. I asked my Isa's to be changed to 2% fixed for 3 years. Yes there was a penalty to pay for doing so ( 90 days interest for one and 180 days the other ) but the increase in rate more than offset this. I didn't know this was possible to do but it will gain me hundreds of pounds extra.

eskbanker

Out of curiosity, what was it that led you to ignore Martin Lewis's ISA-ditching steer and to stick with them?

jimjames

jeansie7 said:

I asked my Isa's to be changed to 2% fixed for 3 years. Yes there was a penalty to pay for doing so ( 90 days interest for one and 180 days the other ) but the increase in rate more than offset this. I didn't know this was possible to do but it will gain me hundreds of pounds extra.

I'm not sure locking in to a 2% rate for 3 years is the most sensible thing with rates rising. I know ISAs allow access so you can cancel before but losing 90/180 days interest will drop the effective rate down. You can (and could have had 1%) on non ISA accounts for some time so you would have earned far more over the last few years if you had followed Martin's advice.
If you are repeatedly locking money up for long periods do you actually need it in cash? If as you say the additional interest will be hundreds then maybe some of that cash would be better off invested so that it has a chance to keep pace with inflation. Otherwise this year your money will effectively lose value by 8% (10% inflation minus 2%)

GrubbyGirl_2

To be honest if you need to keep it in an ISA I would have gone for the best variable rate rather than fix for 3 years.  The prediction is for the rates to go up several more times this year so at least a variable rate will go up too.  They are predicting the base rate to increase to 2.5% by the end of the year so 2 % for 3 years is not looking great.

bristolleedsfan

Best non ISA fix - 2 year 2.57%  ----- 3 year 2.67%

eskbanker

GrubbyGirl_2 said:

To be honest if you need to keep it in an ISA I would have gone for the best variable rate rather than fix for 3 years.  The prediction is for the rates to go up several more times this year so at least a variable rate will go up too.

Some providers move variable rates with base rates, but it's not a given, although staying variable (with easy access) allows movement between providers or accounts without penalty.

GrubbyGirl_2 said:

They are predicting the base rate to increase to 2.5% by the end of the year so 2 % for 3 years is not looking great.

Depends who you mean by 'they' but the BoE's 2.5% base rate prediction is actually for mid 2023 rather than end 2022:

https://forums.moneysavingexpert.com/discussion/comment/79181769/#Comment_79181769