Should I wait before getting a 1 year fixed rate?

[ramsamsam]

As interest rates just went up, should we expect 1 year fixed rates to go up soon? I want to get one but would be really annoyed if they all went up in a week's time. Anyone know what is likely to happen with them?

I have the same decision to make. If it’s a one year fixed savings bond, there isn’t a limit to how many bonds you have, you could put some money in one this month and then some money in another one in a couple of months. I have 3 one year bonds on the go, so one matures every 4 months. Then I reinvest in a new bond at the new rate.

How much do you have to put away? I've got money that I'm intending to put in a fixed rate in a high interest easy access, planning on waiting until the end of the month to see what happens with the interest rates in the wake of the recent hike.

Banks are normally sitting in the fence until one makes a move, then they will all move

I have 80k to worry about which is quite rapidly decreasing in value because of inflation.

I usually wait a week.

But if you have 80k why not split it, put some in a fixed now and the rest a little later?

With that amount it's worth thing of the tax implications on the interest. Tax free options are premium bonds and ISAs.

£20k maximum per year into a cash ISA

It's actually all already in an ISA so I need to decide whether to transfer to it to a 1 year fixed rate ISA or not.

I'd give it a few weeks to see what happens. Recently it seems like one bank do a big hike and the rest scramble around with minute increases so they can be top of the leaderboard.

Thanks Merrow. I think I will do that. Who knows, rates might go up again in December!

Can you have two isas as long as it's not more the total allowance for that year? I never remember this!

You can have a stocks and shares ISA and a Cash ISA simultaneously, but the limit is £20,000 between the two. You can't have two of the same type of ISA though.

I'm not knowledgeable about the subject, but the Guardian says it could take as much as a month for interest rates on fixed-term accounts to increase in response to the rate hike.

Thanks Saracen. I feel completely lost too when it comes to this sort of thing.

Merrow I think the 20k is the limit on the amount you can add in one year. But you can have as much as you like if you add 20k every year,

This is a useful starting point, updated daily.

www.moneysavingexpert.com/savings/savings-accounts-best-interest/

www.moneysavingexpert.com/savings/best-cash-isa/

I opened an account with Atom, you could dither around forever.

I’m in a similar boat.
Going to wait 1-2 weeks and see what happens. As soon as an account hits 4.25% I’m going for it. If there’s no movement hopefully the ones close to 4% stick around and I’ll go for one of those.

Can you buy individual short and medium gilts instead of time deposits? Those are UK government bonds, you can get various durations, and so you could get a mix of short ones and long to medium ones.

If this is inside of an ISA then I presume you are not planning to spend the money soon, but an advantage of a gilt over a fixed term deposit is that if you need the money for some unexpected reason or if you want to invest in something else instead, then you can sell the gilt, sometimes at a small loss If interest rates have gone up since purchase, but not a large loss if the gilt is short enough.

To work out your exposure to loss: if you sell a gilt at a time with higher interest rates than at the moment of purchase, then you would crystallise a loss of about 1% per year of duration, per 1% increase in rates. For instance, a 3-year gilt would drop about 3% in capital value if the interest rate rises by 1%. However, this loss is only if you sell: if you just hold it to maturity, you will not end up realising any loss. And if interest rates go down, you can make a small capital gain instead, so the risk is roughly symmetrical with the reward.

If you put £25k into a fixed rate bond paying 4% interest, that will give you £1k interest which is the max you can earn before paying tax on the interest.

Its worth bearing that in mind before removing from ISAs you already have - you can switch to better ISA rates and keep the tax free status.

If this is £80k between 2 adults, you can have £1k interest tax free each.

I put £15k into a Shawbrook 1 yr bond at 4.5% about 10 days ago. I want to put about another £15k into something similar for DH. On one hand, I think I might get a better rate, but if I wait a month, that’s a month’s worth of 4.5% missed out on. We could only dream if 4.5% a few months ago…although obviously inflation is the problem. I have moved money into a Santander Seaver instant access at 2.75 (closed now to new entrants) so at least I’m getting something while I decide. If something at 4.75 or 5.00 arrived in the next 10 days, I would go for it. There were 4.75s available about 2 weeks ago but they quickly closed.

Atom 1 year fixed is 4.35%

Sorry didn’t make it clear. I’m looking at ISAs as I will exceed the personal savings allowance and get taxed at 40% on all interest over 1k. Will leave an emergency fund in easy access savings - currently Marcus at 2.5%

*over £500

True!

We've got some home improvements coming home that will hopefully be complete before March (when DS2 is due), so I've been focused on easy access rather than fixed. I tend to look at the finance section of HotUKdeals as they're pretty on top of listing new rates, and the comments section will go into the pros and cons of the various banks. Nothing particularly new on the fixed rate front since the interest hike.

I’d pay the school fees for your daughter before you do anything else with your 80
grand.