Transfer a Fixed term ISA before maturity to get a better rate?

savit4l8er

Ocelot said:

The more I look into this the more it seems a no-brainer, assuming all providers allow this.

For eg, I have 52k in a Coventry isa not maturing until 30/11/23, paying 0.85%, which is 443 a year. If I sacrificed, say, 9 months interest (310 say) and put it in a 4% ISA, I could be getting 2087 a year, gaining around 1300 a year, even after the early redemption cost.

Anyone know if my assumptions are correct? Thanks.

On looking at previous accounts, if you are talking about ISA issue 124, it appears to be 180 days interest penalty. Will be circa around £221 or half of your quoted yearly figure if that helps. 
Bit more incentive perhaps. 😉

Ocelot

savit4l8er said:

Ocelot said:

The more I look into this the more it seems a no-brainer, assuming all providers allow this.

For eg, I have 52k in a Coventry isa not maturing until 30/11/23, paying 0.85%, which is 443 a year. If I sacrificed, say, 9 months interest (310 say) and put it in a 4% ISA, I could be getting 2087 a year, gaining around 1300 a year, even after the early redemption cost.

Anyone know if my assumptions are correct? Thanks.

On looking at previous accounts, if you are talking about ISA issue 124, it appears to be 180 days interest penalty. Will be circa around £221 or half of your quoted yearly figure if that helps. 
Bit more incentive perhaps. 😉

At the very least, there should be no chance of missing the boat with higher rates if base rate drops significantly in the next year. In that eventuality we can at least switch in time.

infj

I've been looking at all my fixed ISAs and most have a year's worth of interest loss to move. But as the rates are now getting to double or more what they are fixed at, I think it will be a no brainer to take that loss and move to another product with that provider. I foresee a MSE calculator and a lot of unhappy banks ....
But I don't think I'll do it yet - based on the current plonkers in charge, rates could go much higher soon.

Albermarle

I actually have 5 ISAs and 3 FR Bonds maturing next year on relatively low rates, so food for thought.

If the three FR bonds are not in an ISA, then you will not be able to withdraw them before the fixed term ends ( unless they are with Nationwide, which is an exception for certain products) 

masonic

infj said:

I've been looking at all my fixed ISAs and most have a year's worth of interest loss to move. But as the rates are now getting to double or more what they are fixed at, I think it will be a no brainer to take that loss and move to another product with that provider. I foresee a MSE calculator and a lot of unhappy banks ....
But I don't think I'll do it yet - based on the current plonkers in charge, rates could go much higher soon.

It may be worth considering taking the hit earlier if they look uncompetitive with easy access rates now. If you are going to pay the penalty anyway, this will allow you to get to breakeven faster.

savit4l8er

infj said:

I've been looking at all my fixed ISAs and most have a year's worth of interest loss to move. But as the rates are now getting to double or more what they are fixed at, I think it will be a no brainer to take that loss and move to another product with that provider. I foresee a MSE calculator and a lot of unhappy banks ....
But I don't think I'll do it yet - based on the current plonkers in charge, rates could go much higher soon.

A years worth of interest, so a 365 day penalty, I have seen that term but just checking you have it right because that's pretty steep and painful. You can get some which pay interest not far off the ones with nasty penalties. I don't like 180 days so I would to be pretty comfortable with the rate to go that. 

refluxer

365 day penalties are normally associated with 5 year fixed rate ISAs. It's easy to forget now but, pre-covid (when interest rates were fairly static), fixing for longer periods was the only way to get a higher rate. I would imagine a fair few people panicked and took them out a few years ago when interest rates were heading to zero, too. I know I've definitely got a few fixed rate accounts that look poor by current standards although, thankfully, none with periods as long as that.

Trynsave2

In similar boat. 6mths into 2yr fix with virgin money @ 1.36% whereas to pay the 120 day penalty I could move to their 1yr @ 3.7%.
Was thinking of moving to Santander for same rate, but VM only has 60 day penalty on 1yr. However, with a .75/1% increase being forecast for Nov, think it's worth hanging for another couple of weeks 

Ocelot

Albermarle said:

I actually have 5 ISAs and 3 FR Bonds maturing next year on relatively low rates, so food for thought.

If the three FR bonds are not in an ISA, then you will not be able to withdraw them before the fixed term ends ( unless they are with Nationwide, which is an exception for certain products) 

Indeed - I am stuck with the FRBs for now, but mentioned them to show 'this is what you could have won'.