ISA 1yr or 2 yr Fix?

amd

Hubby and I have ISAs due to mature in a week or so.   Given the current climate, would you go for a 1 or 2 (or even 3!) year fix?  

aroominyork

Future expected reductions/changes in interest rates are priced into the fixes, so unless you have a strong view about where interest rates are heading you cannot beat the system. In theory you are rewarded for longer term fixes, so if you do not need the money in the next couple of years you could consider a longer fix.

Malchester

I have both. A 1 Yr which has this years funds in and a 2 year which I opened in February and transferred a maturing 1 year ISA and and an easy access ISA into. Also have 5 Yr ISA with Gatehouee which has about 3.5 to 4 years to run.

With the new ISA rules from last year you could split your funds between ISAs of different lengths

Mark_d

Since you don't need access to the money for several years, and interest rates will drop significantly according to my crystal ball, then you should go for the 3 year fix.

wmb194

amd said:

Hubby and I have ISAs due to mature in a week or so.   Given the current climate, would you go for a 1 or 2 (or even 3!) year fix?  

This morning on Bloomberg someone was saying that the market is now expecting three or four(!) cuts to the Bank in 2025, so at 25bps per cut that could be 2% lower so I'm beginning to think that fixes might be the way to go.

It isn't all or nothing, though. Depending on when you need the money you could go for a 'ladder' of instant, one, two and three year fixes.

"When the Bank of England held interest rates at 4.5% at its last meeting in March, most analysts thought it would cut twice in 2025, but many now anticipate four cuts will take rates down to 3.5%."

https://www.bbc.co.uk/news/business-57764601

amd

Thanks all.  I just can't see rates going upwards for a while so fixing longer seems most sensible to me right now.

Ocelot

I personally always go for 3 year fixes on ISAs.

VNX

In January I took out a two and a three year fix as, at about 4.4 I didn’t think much chance of better or rates going up in that time frame and I don’t need aces to the monies 

mon3ysav3r

VNX said:

... and I don’t need aces to the monies 

If you did find you absolutely need the money you placed in the Fixed ISA, as mentioned on MSE website, "by law, cash ISA providers MUST allow you to access your money. However, some require you to close the account or transfer out to get your cash. And most will levy heavy penalties on withdrawals."

VNX

mon3ysav3r said:

VNX said:

... and I don’t need aces to the monies 

If you did find you absolutely need the money you placed in the Fixed ISA, as mentioned on MSE website, "by law, cash ISA providers MUST allow you to access your money. However, some require you to close the account or transfer out to get your cash. And most will levy heavy penalties on withdrawals."

Indeed, I did this once where the penalty was less than I’d earn in interest on the new isa 

Ocelot

VNX said:

mon3ysav3r said:

VNX said:

... and I don’t need aces to the monies 

If you did find you absolutely need the money you placed in the Fixed ISA, as mentioned on MSE website, "by law, cash ISA providers MUST allow you to access your money. However, some require you to close the account or transfer out to get your cash. And most will levy heavy penalties on withdrawals."

Indeed, I did this once where the penalty was less than I’d earn in interest on the new isa 

I did it 3 times in 2023, to increase rates from around 0.9% to 5%.