Fixed rate cash ISA

[Malbab]

What is the best three yet fixed rate cash ISA now please
i was going to put in Leeds building society at 5.1 percent And the three year product is now withdrawn…

https://www.moneysavingexpert.com/savings/best-cash-isa/#fixed

Just to add I am weighing up this versus overpaying on mortgage , we are on 1.99 percent fixed rate mortgage and when I did a calculation for example overpaying 25k I am saving exactly the same amount in two years in interest as I would earn if this sum was put in a 5.5 percent cash isa , I think the compound interest of mortgage trumps the savings interest even though it is lesser rate at face value
I am thinking this is money we can use now ( by overpaying and saving interest ) versus interest money I will get at the end of two to three years ( which would’ve devalued anyway due to inflation ) am I thinking right?? sorry for the confused convoluted post …

Put it in an ISA then, at the end of the three years, reevaluate and pay off them with the additional amount.

You're wrong (or overcomplicating it) about overpaying your mortgage. The only factor is the interest rate, after tax if necessary. You can get much more interest than 1.99% in savings, so park your £25k in an ISA (and the rest in a normal savings account) and pay it off when the 1.99% rate ends.

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

This calculator let’s you compare overpayment against saving. I am struggling to see how overpaying can work out better for you at the moment.

*lets

There‘s no compounding interest on a mortgage

Thanks I used the calculator but it gives a trajectory over twenty years but our fixed rate ends in three years so not sure how to compare this …
if I overpay 25k it says I can save 114 pounds a month and in two years it will save 2736
if I put in IsA for two years the interest is 2800 so pretty much the same
however that 114 pounds i save I can then overpay every month again into the mortgage and save more interest 😅 so me thinking this is better option ?
the 2800 pounds at the end of two years will be worth less anyway than money I get now ,due to inflation!

Inflation is irrelevant as it affects the value of the mortgage and the value of your cash savings equally.

What you're overlooking is that you will be paying the £25k off your mortgage in 3 years time so it will reduce the interest charged and monthly payment from that point on.

The only comparison you need to do is interest charged on £25k at 1.99% vs interest earned on the same amount at 5.5%. The latter is obviously more than double, so there's your answer.

Sorry if I am not clear
I want to pay the 25k now and want to compare the interest saved , versus if I put in cash isa for three years and interest earned
the actual numbers seem the same despite interest rates twice in savings, that is the dilemma

I used the natwest overpayment calculator

Have you used the MSE overpayment calculator linked to above? That takes account of saving separately, so should confirm that it is better to save now and overpay later.

If a calculator is showing you that there's little difference in overpaying now vs overpaying when your rate ends, it's either incorrectly set up, or you're not putting in accurate information. A quick back of the envelope comparison shows that you'll earn over £2000 extra interest in the ISA, than you'd save by overpaying.

Yes I used the MSE calculator but it is not accurate I think because it assumes the rates to be the same ( both mortgage and savings interest ) for the next 22 years , which wont be true , I am only looking at comparison for next three years , can’t find any link to calculator which will do that…

Hi thanks I thought mortgage interest is compounding that means interest is calculated every day as opposed to savings rate is calculated annual

Compounding is interest on interest - it‘s not how you repay a mortgage

5.5% interest on £25k will pay £1,375 per year
1.9% interest on £25k will cost £475 per year

Or £497.50 at 1.99%

Thank u all for your help
i will put in 3 year fixed isa TSB has good rate at the moment 😊

You are over complicating this. You can only really compare the time periods for which the two interest rates are available. Having your money earning 5% for two years is miles better than overpaying your 1.99% mortgage for the same two years.

If in two years time when you come to maybe re fix your mortgage, it is likely that the interest rate will be a lot higher than 1.99%, lets say it is broadly the same as any savings rate you will get at the time. You can either a) not overpay and keep savings and they cancel each other out but you have access to the cash should you need it b) overpay a lump sum to reduce your mortgage balance when you get your new mortgage, this will give you the biggest savings impact on your mortgage interest or c) keep the money in savings and over pay the mortgage monthly, this will also reduce your interest paid on the mortgage but less so than option B but again you retain flexibility in access to cash should you need it.

Which option you choose will depend on what other provisions you have outside of the details shared in this post i.e. other emergency funds

5.66% Zopa 3-year fixed term ISA

https://www.zopa.com/smart-isa

Zopa - DH and I have just opened 3 year ISAs. Really easy journey and good rate.