Longest duration Fixed Rate-cash ISA allowing monthly deposits throughout term.

cmonwigan

Good evening all, 

I am looking for a savings vehicle to help pay off a buy-to-let interest only mortgage. My mortgage rate is 3.79 fixed for the next nine years.  As ISA interest rates are improving at the moment, I was thinking of using a longterm fixed rate ISA that would accept ISA transfer, but most importantly allow regular monthly payments of £300. 

The Principality BS do a 5 year fixed, which accepts ISA transfers and allows regular monthly payments, but you can only "Add more money to the ISA until it is taken off sale". My plan was to transfer an existing cash ISA of £30k and pay in £300 pcm from the rent we receive. This would have generated @£100k over 10 years, assuming we could have found a similar product down the line. Either way, we would have a healthy sum after five years.

Does anyone know of an ISA offering a decent long-term rate which allows deposits throughout the length of the fixed rate term? I can't seem to find one.

If anyone has a better suggestion for a fire and forget way to pay off an interest only mortgage, please do share.  I do not intend to sell the property, my intention is to keep renting it out to supplement our retirement income. The house is entirely in my wife's name as she is not a higher rate tax payer.  I am a higher rate tax payer.  I also have a S&S ISA, but I am trying to make sure I don't have all my eggs in one basket and hence my interest in using cash method.

Thanks

badger09

Very few fixed rate ISAs or non ISA savings accounts allow further subscriptions for very long. 

The issue your wife faces with that  Principality product is that at any time they could withdraw it from sale. As age can only pay new money into one cash ISA at a time, she would either waste the rest of that year’s allowance, or face a penalty for transferring current year subscriptions to another provider. And that assumes Principality allow partial transfers out. 

Instead, she could open the 5 year FRISA for her £30k. Then, open one or more, of the high interest regular savings accounts & save £300 per month. When they mature, pay the balance into the highest fixed rate account (ISA or non ISA) for the appropriate duration. Rinse & repeat. 

Doctor_Who

Does anyone know of an ISA offering a decent long-term rate which allows deposits throughout the length of the fixed rate term? I can't seem to find one.

As above - I am not aware of any. Fixed rate ISAs have a funding/transfer window, after which you can't add more money. I don't think there is a simple 'fire and forget way', if you want a reasonable return on the money until you use it to pay off the mortgage then it will require some 'hands on time'. 

Zuzi

The current Lloyds one year ISA is a fixed rate ISA (rate fixed for a year) but allows deposits throughout the term. They are also offering a two year product, I'd double-check but it's probably the case for that ISA too.

I have confirmed this with them since I opened the one year product and wanted to continue funding it over a period of time longer than a standard "funding window".

https://www.lloydsbank.com/isas/1-year-fixed-rate-cash-isa.html

steveksullivan

Search back for posts I have done on Shawbrook ISA's  .... in several phonecalls SEVERAL of their CS representatives have told me that further deposits can be made for the duration of the fix ....

Doctor_Who

You live and learn! I'd always thought fixed rate ISAs only accepted deposits during the funding window, but it seems that at least some providers allow additional deposits during the whole term. Shawbrook doesn't make this at all obvious in the 'summary information' on the website, but it is buried in the T&Cs:

You can make additional deposits into the account up to the maximum annual allowable subscription amount for the applicable tax year. 

https://www.shawbrook.co.uk/media/5777/1-year-fixed-rate-cash-isa-bond-78.pdf

fabsaver

Kent Reliance is another that allows further deposits throughout the term. Currently the longest term they offer is 2 years.

https://forums.moneysavingexpert.com/discussion/6443226/kent-reliance-cash-isa-2yr-fixed-rate-issue-62-4-4-topping-up

Albermarle

This flexibility only seems to be with certain ISA's. I am not aware of any non ISA fixed term accounts offering it.
My guess is that with an ISA, you are naturally limited to £20K in new money, so the flexibility can not be abused too much.
Not sure what Kent Reliance or Shawbrook would do, if interest rates were dropping and their Two year fix rate suddenly looked very attractive and people started to try and transfer ISA's from previous years worth Hundreds of Thousands of Pounds in. Presume there is something in their T's and C's about that.

OP - This issue with fixed term savings accounts is that you ( and the savings provider) take a gamble on future interest rates and lock in the amount and the rate for the fixed term. So normally they do not allow further additions after the bet is placed.

cmonwigan

Definitely food for thought. I will probably go down the path of max'ing the 5 year fixed at Principal (or similar), and then finding a high interest regular saving account, as per Badger's suggestion.
Thanks everyone

fabsaver

Albermarle said:

This flexibility only seems to be with certain ISA's. I am not aware of any non ISA fixed term accounts offering it.
My guess is that with an ISA, you are naturally limited to £20K in new money, so the flexibility can not be abused too much.
Not sure what Kent Reliance or Shawbrook would do, if interest rates were dropping and their Two year fix rate suddenly looked very attractive and people started to try and transfer ISA's from previous years worth Hundreds of Thousands of Pounds in. Presume there is something in their T's and C's about that.

OP - This issue with fixed term savings accounts is that you ( and the savings provider) take a gamble on future interest rates and lock in the amount and the rate for the fixed term. So normally they do not allow further additions after the bet is placed.

In the case of Kent Reliance they do have that covered. Transfers in are only permitted for the first 30 days after account opening. After that it is new money only, which as you say limits what can be added.

steveksullivan

...... although, following on from my last post,  Shawbrook have confirmed on several occasions that they will accept transfers in for the period of the fixed rate - I opened the account in May and was SPECIFICALLY asking about transferring in a Virgin ISA due to mature in October (not relevant now as new rates beat that account ....)

N.B. MSE still say in their Top Rates tables that Shawbrook only accept transfers in at application .....