Invest in a fixed rate ISA now or hold off for a couple of months and see if rates go up?

gregegg

Hi all, I've recently come into 24k inheritance. I'm in my mid 20s and the money will probably be used to buy a house in 5 years or so when I'm in a more stable personal situation. First off the bat, I'm gonna get a LISA as soon as possible and then probably set 5k aside in a easy access savings account as an emergency fund. But that still leaves a fair chunk after that.

This is where the question in the title comes in - for the remaining ~15k. I've had a look over the best 1,2,3 & 5 year fixed rate ISAs as recommended on MSE, and some of the rates do look quite tasty. However, the BoE keep putting interest rates up and up, and inflation continues to sky rocket. For this reason, it seems like ISA rates will increase significantly in the next 6 months or so. Top 1 year rates are 3.8%, 2 year rates are 4.4%. Easy access savers are around 2.5%.

My current line of thinking is to stick the remaining 15k in a top easy access saver (since that is what I'm going to do with my emergency 5k anyway), and in the mean time watch and wait on fixed ISA interest rates over the next couple of months - and decide what to do then. Anything I'm missing or being naive about? (probably everything)

RobM99

How about a shortish notice account?  Might hedge your bets, so to speak.

gregegg

Thanks, that's a good idea, I hadn't thought of that.

Ocelot

You might not need an ISA at the moment if your savings income doesn't exceed £1000 pa (or £500 pa if you are a higher rate tax payer), and non-Isas pay better rates.

I'm also dubious as to whether rates will get any better, although no crystal ball!

dale_cotterill

Fixed Rates have peaked, and are on the way back down. They are priced based on future rate expectations, which have been coming down for a while now.

gregegg

Everywhere I've looked suggests that rates are going up, but if they're on the way down - would that suggest a longer term (3 or 5 years) fixed rate ISA / fixed rate savings account is a good idea, to lock in an interest rate while they're still high? 

andyhicks88

I read the other day though that often as 'normal' fixed rates go down it can send the fixed rate ISA's up but we aren't seeing much to support that.

Albermarle

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gregegg

Wherever I put my 15k, I'd like to be able to transfer the maximum 4k per year from it to my lifetime ISA.

If I were to open a fixed rate bond or ISA, would transferring that 4k across per year be classed count as a withdrawal?

I've tried to do some reading around but it doesn't seem very clear.

Albermarle

You can not transfer out of a fixed rated deal outside an ISA, until the term ends.

Within an ISA, you can transfer out of a fixed rate deal with a penalty. I can guess that trying to make a partial transfer in this situation would be not possible.

jimjames

gregegg said:

Wherever I put my 15k, I'd like to be able to transfer the maximum 4k per year from it to my lifetime ISA.

If I were to open a fixed rate bond or ISA, would transferring that 4k across per year be classed count as a withdrawal?

I've tried to do some reading around but it doesn't seem very clear.

It would count so wouldn't be a good idea to open an account more than 1 year duration for the whole amount.