1 yr fixed rate savings early withdrawal

Malthusian

Apart from ISAs, there was also an oddity with some NS&I accounts where it was better to take out a 3 year bond and withdraw after 1 year than to take out a 1 year bond. The extra interest outweighed the penalty. So by no means a daft question.

If you are worried that you might lose out on interest if you tie the money up for a year then I would say that a one year fixed rate account is not for you.

anonmoose

Albermarle said:

MK62 said:

Daliah said:

 Though their rates are absolutely terrible - - - we can get better instant access rates than they offer even for the 2 year account. I feel sorry for people who fall for their offers.

You'd be surprised how many people either don't bother looking at the savings market for alternatives at all, or else give it little more than a cursory glance......maybe a case of "the more you have the harder you tend to look".....

On the opposite side, I think debating  about choosing to take a 2.6% rate now, or wait for a hopefully 3% rate soon, is probably a waste of time/energy unless you really have a huge stash. For most people the amounts involved either way are peanuts compared to inflation etc. 
I am not saying that some shopping around is not useful, but when it comes down to worrying over the last 0.1%  and/or the hassle of opening new accounts to get that, then it seems hardly worth it.

In my case its roughly £150k which isn't peanuts to me hence the dilemma on what to do. I don't think it's a waste of time taking time to think about where to park that for a Yr.

Daliah

anonmoose said:

Albermarle said:

MK62 said:

Daliah said:

 Though their rates are absolutely terrible - - - we can get better instant access rates than they offer even for the 2 year account. I feel sorry for people who fall for their offers.

You'd be surprised how many people either don't bother looking at the savings market for alternatives at all, or else give it little more than a cursory glance......maybe a case of "the more you have the harder you tend to look".....

On the opposite side, I think debating  about choosing to take a 2.6% rate now, or wait for a hopefully 3% rate soon, is probably a waste of time/energy unless you really have a huge stash. For most people the amounts involved either way are peanuts compared to inflation etc. 
I am not saying that some shopping around is not useful, but when it comes down to worrying over the last 0.1%  and/or the hassle of opening new accounts to get that, then it seems hardly worth it.

In my case its roughly £150k which isn't peanuts to me hence the dilemma on what to do. I don't think it's a waste of time taking time to think about where to park that for a Yr.

Mind the FSCS limit.

anonmoose

Yes thanks Daliah, I will do. I will either split between accounts for me and husband or keep some in PBs.

Albermarle

In my case its roughly £150k which isn't peanuts to me hence the dilemma on what to do

I did say ' unless you have a huge stash' and in terms of cash savings, this is pretty large by most peoples standards

Also normally if you have that much in cash savings, it would be unusual for it to be all available at one time, as normally some would be tied up in fixed term accounts.

2010

Yorkshire_Pud said:

Daliah said:

Most banks will not allow you to withdraw from fixed rate accounts. The exceptions are ISAs, where withdrawals are allowed with various, severe, interest rate penalties, and death of the account holder.

I just closed my Coventry BS fixed ISA 1.2% opened in January this year and due to mature May 2024. Six month interest penalty paid and a net loss on the capital sum deposited. To say I am ‘fed up’ is an understatement but pragmatically I will get more interest from bond paying 2.45% and 2.61% for 12 month which will cover the loss and buy new bonds maybe in 12m. First time I have ever closed a bond early.

As for Coventry BS I’m going to send them to Coventry from now on. 

I can`t see why you are blaming Coventry.
When you took the bond out in January you must have thought it was worth it and you also knew what the T&C were regarding early closure.

Will the bonds paying 2.45% and 2.61% be worth taking out if rates keep climbing?

janusdesign

I know Marcus could give you a 1-Yr fixed with early access for a fee (first 90 days interest), though they only offer 2% - so if you had £85k in the account, that's a £500 difference in interest between 2% (£1,700) and 2.6% (£2,210)... for your balance, that's the best part of £1k less in interest.

as others have said, I would treat fixed-rate accounts as untouchable once opened - Marcus is a rare exception I know of, but generally speaking, you can't get the money out early (short of death)... so treat anything you put in there as something you won't need for a year... if you think you might need some of it, then leave that amount in an easy access account.

also, there is no need to think that you need to open 2 x £75k fixed rate accounts... if the rates continue to rise for the next few months, you could open a £30k fixed rate account now, wait for the next BoE rate rise and do the same again... keepin g the rest in easy access and/or notice accounts.

remember that whatever you do, you'll be very lucky (literally) to fund these accounts at peak rates to maximise interest when looking back in 15 months time, so just split the balance between the most appropriate accounts for your needs (instant/notice/fixed).

anonmoose

I think that explains it Malthusian as I thought it was an NS&I account that I had before not an ISA.

No I am not interested in withdrawing because of the changing interest rate situation, it was more if for example we have a massive crash in the stock market or housing market I might change strategy on where I put the money long term.  I see this as very unlikely to the level I would change my strategy but it's nice to keep options open if you can.   It sounds like understandably the best rates are found in accounts with no withdrawals allowed.

It might well be a good idea to split the money out a bit as janusdesign mentions above. Then it gives me options and I could keep some access to part of it.

Stubod

..Monument have just issued a 3.05% 2 year fixed rate bond....

anonmoose

Thanks Stubod, I don't want to fix for more than 1 yr but hopefully it will be of interest to others.