One or two year fixed rate?

twopenny

Want to move my ISA to a better rate sharpish.

So my research has been brief but with your chrystal balls, would it be reasonable to go for a 2yr at over 4% with the view that seems to be, inflation will drop and so will the interest rates?

I'm thinking that even if it does rise some in the next year the chances are the difference will be minimal and a bird in the hand etc.

So should it be one year with the chance of a small rise next year for another move, or 2yr reasonable rate and a while without hassle?

Your thoughts please.

tunde10

You can get 4.35% for 2 years.

https://www.moneysavingexpert.com/savings/best-cash-isa/#twoyearfixed

I personally went for 2 years end of last year. As it's an ISA, if you need the funds, you can always take it out and lose some interest. Makes more sense to secure the high rates for longer.

eskbanker

My thought is that financial institutions set their fixed rates based on their projections for what interest rates (and other factors, such as gilt yields, etc) will do over the relevant periods, and they'll have plenty of analysts and inside information, so anything known to the general public about forecast changes to inflation, etc, will already be factored into what's on offer....

DavidT67

How like are you to need to access that money within the next two years ?

What's the early withdrawal penalties on the accounts you are looking at ?

Personally, I've gone for slightly lower rates with lower penalties for 1yr and 2yr fixed rate ISAs.

refluxer

If you're not sure, one option could be to transfer half of your ISA into one of each duration - that's presuming that partial transfers out are allowed, which I'd imagine they would be if it's an easy access ISA ?

twopenny

Yes indeed ebanker, which is why 4%+ for the second year seems to indicate it will stay the same if not go up a tad.

That's a point David. There's no rush to take it out as it's supposed to be my back up income for old age and the interest for spending. However life is in flux at the mo so it might be a thought to put a bit less in this and find another for spending if I go for the 2yr..........thanks for unsticking my thoughts!

Tunde, that was my usual thoughts but everything is constantly changing these years from what I've always known and I don't know what's ahead. It's like trying to keep a grip on fog.

Cross post Reflux. Thanks, that's weirdly something I hadn't thought of.

twopenny

Think I've found an ISA with not awful rates I can put part into with 6 withdrawals PA so that could be the answer.

The bulk to go into the higher rate.

Next trick is to move this around.

VNX

My personal option is I like two/three year fixes from where we are currently.

very uncertain times no one knows but IF inflation does start to fall soon then even if you take a fix and rates tick up a little you shouldn’t be in too bad a place for the coming years.

I’ve got a mix of two and three year fixes.

as long as nothing crazy happens you shouldnt be too badly off. Unlike those who took out fixes at around 1pc and saw rates rise fast while being locked in.

but as you say it’s Crystal ball stuff, do your research and make a decision you are happy with now and run with it.

Albermarle

VNX said:

My personal option is I like two/three year fixes from where we are currently.

very uncertain times no one knows but IF inflation does start to fall soon then even if you take a fix and rates tick up a little you shouldn’t be in too bad a place for the coming years.

I’ve got a mix of two and three year fixes.

as long as nothing crazy happens you shouldnt be too badly off. Unlike those who took out fixes at around 1pc and saw rates rise fast while being locked in.

but as you say it’s Crystal ball stuff, do your research and make a decision you are happy with now and run with it.

I fixed one at 3 years in October at a rate that is still a little higher than you can get today. My OH has just rolled over another one for 3 years, and I have a two year ISA recently started.
So we are thinking on the same lines, that in a year or so's time, the interest rate will be higher than inflation, hopefully....
Following the same logic, should maybe have fixed for longer, but I have always thought 5 years is a long time for fixing anything.