Switch fixed 2 year isa after 6 months and sign up to 1 year at a better rate?
shap101
Forumite Posts: 70
Forumite
Can anyone help I have 55369 in a 2 year fixed ISA which was opened on the 17th of November 2022
paying 4.38% looking to switch to one paying 4.95% for one year . is it is worth switching if I receive a 90 day interest penalty ?
Worked out the following
2 year in the current isa total interest £4850.32
Monthly interest £202
90 days penalty £606
New ISA for 1 year at 4.96% works out to be £2746.30 for the one year.
then my brain has gone blank as I have only been with the fix for 7 months so cannot figure out if they will compound the interest at the end of the first year will it make a difference .
Aay help would be appreciated
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Comments

Add the interest for 2 years and deduct £600.
See what pays more.
If I were to switch I would opt for Virgin money 5% 3 year ISA. 120 days exit fee.
Rates have gone up 0.20% in 2 days.
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Bigwheels1111 said:Add the interest for 2 years and deduct £600.
See what pays more.
If I were to switch I would opt for Virgin money 5% 3 year ISA. 120 days exit fee.
Rates have gone up 0.20% in 2 days.
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Not worth switching to a 1 year fix as you will be worse off due to the 90 day penalty.
If your interest is credited to the account, it will be compounded, it it is paid to another account it won’t be.
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shap101 said:Can anyone help I have 55369 in a 2 year fixed ISA which was opened on the 17th of November 2022paying 4.38% looking to switch to one paying 4.95% for one year . is it is worth switching if I receive a 90 day interest penalty ?Worked out the following2 year in the current isa total interest £4850.32Monthly interest £20290 days penalty £606New ISA for 1 year at 4.96% works out to be £2746.30 for the one year.then my brain has gone blank as I have only been with the fix for 7 months so cannot figure out if they will compound the interest at the end of the first year will it make a difference .Aay help would be appreciated
If you ditch the 2 year fix now then there will be interest of ~£1400 and a fee of ~£600, so net ~£800
If you then fix for ~18 months (so total term is the same and we're comparing like with like) and add the £800 to the original sum at 5% that gives ~£4200, so a total of ~£5000 of interest
So it's pretty much breakeven within ~£50. Trying to compare 2 year fix vs 1 year fix isn't really possible.
'Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it'  Albert Einstein.0 
bristolleedsfan said:Bigwheels1111 said:Add the interest for 2 years and deduct £600.
See what pays more.
If I were to switch I would opt for Virgin money 5% 3 year ISA. 120 days exit fee.
Rates have gone up 0.20% in 2 days.Thats why Ive held off, I want to put my emergency fund in there.Would cost £165 to access 10k in an emergency.0 
thanks for the help , will hold off for the time being .
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Just an update , held off from switching but can get 5.9% on a fixed rate isa with natwest .. If I take the hit of £600 on fees would I recoup this within the 5 months on the new rate ? 4.38% compared to the 5.9% .0

shap101 said:Just an update , held off from switching but can get 5.9% on a fixed rate isa with natwest .. If I take the hit of £600 on fees would I recoup this within the 5 months on the new rate ? 4.38% compared to the 5.9% .
https://www.moneysavingexpert.com/savings/isaswitchcalc/
'Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it'  Albert Einstein.1 
It turns out to be 180 days interest ( I thought it was 90 days) so would be a £1200 charge on the full amount so would not be worth it as I would only gain £25 by switching .. gutted as I can get about the same rate on a normal ISA now without fixing and will be losing £1200 in interest over the same period by not being able to sign up to the 5.9% .. I read in the terms and conditions ..
 Yes, you can withdraw all or part of the money during the Fixed Rate Period, provided that any partial withdrawal does not reduce the Account balance below the minimum balance of £5,000. This is subject to a charge, by way of a loss of 180 days interest on the amount withdrawn. This may be deducted from the balance in your Account on closure and therefore you may receive back less than you have paid in.
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A couple of notes about that MSE checker
Firstly the individual numbers seem more accurate if you enter a monthly interest rate rather than an AER even if the final answer is likely similar if both rates entered are AERs,
Secondly it doesn't ask what the term is for the new account  for example if you're transferring a 2 year with 18 months left to run into a new 5 year account it calculates both amounts of interest over the next 18 months  but you'd continue earning that new higher rate for the 5 years.0
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