Paragon Defined Access ISA vs Fixed Rate ISA why the higher rate?

Mr_Teeny

Can anyone explain why the Defined Access ISA's have a higher rate than a fixed rate one? Is it simply that they hope people will fall into the trap of making more than a couple of withdrawals? Obviously the rate difference isn't much but you'd assume a fixed rate would be higher.

Thanks

wmb194

Mr_Teeny said:

Can anyone explain why the Defined Access ISA's have a higher rate than a fixed rate one? Is it simply that they hope people will fall into the trap of making more than a couple of withdrawals? Obviously the rate difference isn't much but you'd assume a fixed rate would be higher.

Thanks

Short term money costs more than longer term money at the moment e.g., one month Treasury bills are currently c.5.15% whilst two year gilts are about 4%. Plus the defined access account is variable rate so you could argue that you're 'paying' for the certainty of a fixed rate in an environment where the Bank rate is expected to fall in the next few months.

Albermarle

Basically the longer term outlook for interest rates is for them to be lower than they are today. So when a savings provider offers a long term fix, they take account of this. 

Mr_Teeny

Thanks so basically the Defined rate is a variable rate and can be changed with 14 days notice, was unclear on first viewing whether the variable part simply referred to the dropped rate after 3 withdrawals.