Fixed rate ISA loss of interest on transfers ?

shadowdog

We have 2 fixed rate 1 year ISA s with Virgin money and so far this year have transferred twice to obtain the higher interest rate along with the loss of interest for 60 days on each occasion. My question is it better to to stick with current rate 1.7% or go to 3.02% with another loss of 60 days interest  or transfer these to  to a variable rate as i see interest rates only going further up. Any thoughts on possible options? 

refluxer

You'd need to provide the interest rate, original amount put in and the start date of the ISA(s) you're talking about in order for people to tell you whether you'll be better off by switching to another fixed rate. Alternatively, you could try putting the relevant figures into this simple calculator and having a go yourself.

https://gatehouselaw.co.uk/tools/simple-interest-calculator/

When I do these calculations, I pick the date at which the current ISA is due to mature and work out the rough value of that ISA at maturity if it was left to run it's course. Then, work out how much you'd get by transferring out today, take off the penalty and put that new figure back into the calculator but at the new ISA's rate and set the end date to be the same as the maturity date of the original ISA. That way you have a like-for-like comparison on that particular date which should help with the decision of whether to transfer or not.

One thing to bear in mind though is that interest rates have been steadily rising since the start of the year so once you fix, there is currently a good chance that a higher rate won't be far away. The issue with continually fixing, then transferring and taking the penalties is that you could end up worse off than if you'd just stayed put, even if the new rates are higher. One advantage of Virgin though, admittedly, is that their penalties are lower than many of their competitors.

The question of whether to transfer to another fixed rate or an easy access ISA and wait for a future fix is a lot harder to answer - there are just too many unknowns which makes that decision harder than simply going from a fixed rate to another fixed rate.

shadowdog

refluxer said:

You'd need to provide the interest rate, original amount put in and the start date of the ISA(s) you're talking about in order for people to tell you whether you'll be better off by switching to another fixed rate. Alternatively, you could try putting the relevant figures into this simple calculator and having a go yourself.

https://gatehouselaw.co.uk/tools/simple-interest-calculator/

When I do these calculations, I pick the date at which the current ISA is due to mature and work out the rough value of that ISA at maturity if it was left to run it's course. Then, work out how much you'd get by transferring out today, take off the penalty and put that new figure back into the calculator but at the new ISA's rate and set the end date to be the same as the maturity date of the original ISA. That way you have a like-for-like comparison on that particular date which should help with the decision of whether to transfer or not.

One thing to bear in mind though is that interest rates have been steadily rising since the start of the year so once you fix, there is currently a good chance that a higher rate won't be far away. The issue with continually fixing, then transferring and taking the penalties is that you could end up worse off than if you'd just stayed put, even if the new rates are higher. One advantage of Virgin though, admittedly, is that their penalties are lower than many of their competitors.

The question of whether to transfer to another fixed rate or an easy access ISA and wait for a future fix is a lot harder to answer - there are just too many unknowns which makes that decision harder than simply going from a fixed rate to another fixed rate.

Thanks for reply refluxer, I found the calculator very good, Our current rate is 1.7% for 1 year fix (exp may 2023) and virgin now have 1 year fix at 3.02%. I m going to wait a few days to see what BOE does as i suspect another virgin rate increase and then transfer to this new rate to minimise amount of transfers.