Wait for BOE Interest rates before opening fixed ISA

masonic

Kinkajou said:

I came here today to ask the same question and the responses here are very valuable.  I have a couple of ISAs that have matured now earning 0.50 and 0.05.  Since today ( Sep 22) BOE rate rise, I too was thinking to wait a couple of weeks.  I was thinking to transfer to an easy access ISA paying 1.25 in the short term, but that would entail a lot of faffing around.

If the ISAs are flexible, it would perhaps make more sense to withdraw the funds and hold in a normal easy access savings account in the short term rather than transferring the ISAs.

Kinkajou

masonic said:

Kinkajou said:

I came here today to ask the same question and the responses here are very valuable.  I have a couple of ISAs that have matured now earning 0.50 and 0.05.  Since today ( Sep 22) BOE rate rise, I too was thinking to wait a couple of weeks.  I was thinking to transfer to an easy access ISA paying 1.25 in the short term, but that would entail a lot of faffing around.

If the ISAs are flexible, it would perhaps make more sense to withdraw the funds and hold in a normal easy access savings account in the short term rather than transferring the ISAs.

Hi Masonic, thanks for your reply!  I believed if I withdrew the funds and held then in a normal easy access account the funds would lose their tax free status. That what I understood about the ISA rules.

masonic

Kinkajou said:

masonic said:

Kinkajou said:

I came here today to ask the same question and the responses here are very valuable.  I have a couple of ISAs that have matured now earning 0.50 and 0.05.  Since today ( Sep 22) BOE rate rise, I too was thinking to wait a couple of weeks.  I was thinking to transfer to an easy access ISA paying 1.25 in the short term, but that would entail a lot of faffing around.

If the ISAs are flexible, it would perhaps make more sense to withdraw the funds and hold in a normal easy access savings account in the short term rather than transferring the ISAs.

Hi Masonic, thanks for your reply!  I believed if I withdrew the funds and held then in a normal easy access account the funds would lose their tax free status. That what I understood about the ISA rules.

You can withdraw money from flexible ISAs and replace it within the same tax year without it counting against your allowance. You would need to check whether the ISAs you hold are flexible.

https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#f-isa

Kinkajou

masonic said:

Kinkajou said:

masonic said:

Kinkajou said:

I came here today to ask the same question and the responses here are very valuable.  I have a couple of ISAs that have matured now earning 0.50 and 0.05.  Since today ( Sep 22) BOE rate rise, I too was thinking to wait a couple of weeks.  I was thinking to transfer to an easy access ISA paying 1.25 in the short term, but that would entail a lot of faffing around.

If the ISAs are flexible, it would perhaps make more sense to withdraw the funds and hold in a normal easy access savings account in the short term rather than transferring the ISAs.

Hi Masonic, thanks for your reply!  I believed if I withdrew the funds and held then in a normal easy access account the funds would lose their tax free status. That what I understood about the ISA rules.

You can withdraw money from flexible ISAs and replace it within the same tax year without it counting against your allowance. You would need to check whether the ISAs you hold are flexible.

https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#f-isa

Oh thank you for educating me on this! I didn't know this at all about flexible ISA's. (Mine was fixed  & now matured)  but this is great information! I will bear this in mind moving forward and I'm sure you've educated others too. 👍

Leodogger

I am about to open a Fixed Rate ISA with Santander but would I be better off waiting as the BoE increased its rate yesterday by 0.5%.   How long would it take to affect the ISA's with Santander, I don't want to lock in a rate of 3% if it is about to increase?   I am at the moment only getting the 123 account rate of 1% on a lump sum of £40,000!!

masonic

Leodogger said:

I am about to open a Fixed Rate ISA with Santander but would I be better off waiting as the BoE increased its rate yesterday by 0.5%.   How long would it take to affect the ISA's with Santander, I don't want to lock in a rate of 3% if it is about to increase?   I am at the moment only getting the 123 account rate of 1% on a lump sum of £40,000!!

Based on the last cycle, it took about 3 weeks before rates reached a sort of equilibrium. That put us within a few weeks of the next meeting and rates soon started creeping up again in anticipation. While rates are being hiked this aggressively, there is always a better rate just around the corner, so if you're going to wait, it may be worth waiting a few months.

Leodogger

masonic said:

Leodogger said:

I am about to open a Fixed Rate ISA with Santander but would I be better off waiting as the BoE increased its rate yesterday by 0.5%.   How long would it take to affect the ISA's with Santander, I don't want to lock in a rate of 3% if it is about to increase?   I am at the moment only getting the 123 account rate of 1% on a lump sum of £40,000!!

Based on the last cycle, it took about 3 weeks before rates reached a sort of equilibrium. That put us within a few weeks of the next meeting and rates soon started creeping up again in anticipation. While rates are being hiked this aggressively, there is always a better rate just around the corner, so if you're going to wait, it may be worth waiting a few months.

But meanwhile how much interest am I going to lose whilst waiting?  Wouldn't I be better at least putting some of the capital into an ISA?    How do variable rate ISA's compare which might increase ?

masonic

Leodogger said:

masonic said:

Leodogger said:

I am about to open a Fixed Rate ISA with Santander but would I be better off waiting as the BoE increased its rate yesterday by 0.5%.   How long would it take to affect the ISA's with Santander, I don't want to lock in a rate of 3% if it is about to increase?   I am at the moment only getting the 123 account rate of 1% on a lump sum of £40,000!!

Based on the last cycle, it took about 3 weeks before rates reached a sort of equilibrium. That put us within a few weeks of the next meeting and rates soon started creeping up again in anticipation. While rates are being hiked this aggressively, there is always a better rate just around the corner, so if you're going to wait, it may be worth waiting a few months.

But meanwhile how much interest am I going to lose whilst waiting?  Wouldn't I be better at least putting some of the capital into an ISA?    How do variable rate ISA's compare which might increase ?

The best is currently 1.9%. A flexible easy access ISA is an option while you wait, which would allow you to deploy cash elsewhere without having to do an ISA transfer, you could flexibly withdraw and use a higher paying standard saver (for example Al Rayan @ 2.1%). At a 1% difference in rates, the cost of waiting is 0.02% per week. While interest rates are being hiked 0.5% every 6 weeks, you can obtain an extra 0.08% each week you wait on average. Even for a 0.25% hike you stand to gain securing an increased rate later. Providing savings rates continue to track the base rate rises, which they have so far, waiting seems the optimal choice, unless you have a reason for your funds to mature at a particular time.

Leodogger

masonic said:

Leodogger said:

masonic said:

Leodogger said:

I am about to open a Fixed Rate ISA with Santander but would I be better off waiting as the BoE increased its rate yesterday by 0.5%.   How long would it take to affect the ISA's with Santander, I don't want to lock in a rate of 3% if it is about to increase?   I am at the moment only getting the 123 account rate of 1% on a lump sum of £40,000!!

Based on the last cycle, it took about 3 weeks before rates reached a sort of equilibrium. That put us within a few weeks of the next meeting and rates soon started creeping up again in anticipation. While rates are being hiked this aggressively, there is always a better rate just around the corner, so if you're going to wait, it may be worth waiting a few months.

But meanwhile how much interest am I going to lose whilst waiting?  Wouldn't I be better at least putting some of the capital into an ISA?    How do variable rate ISA's compare which might increase ?

The best is currently 1.9%. A flexible easy access ISA is an option while you wait, which would allow you to deploy cash elsewhere without having to do an ISA transfer, you could flexibly withdraw and use a higher paying standard saver (for example Al Rayan @ 2.1%). At a 1% difference in rates, the cost of waiting is 0.02% per week. While interest rates are being hiked 0.5% every 6 weeks, you can obtain an extra 0.08% each week you wait on average. Even for a 0.25% hike you stand to gain securing an increased rate later. Providing savings rates continue to track the base rate rises, which they have so far, waiting seems the optimal choice, unless you have a reason for your funds to mature at a particular time.

Sounds like a good plan !   Thanks!