Lock In Higher Rates With A Fixed Rate ISA

UK savers who have seen the interest rates on their individual savings accounts fall over the past few months should seriously consider transferring funds over to a fixed rate account now.

According to Defaqto a typical ISA with a variable rate now pays around 2.5 per cent but there are major high street banks offering as little as 0.1% on their accounts leaving millions scouring the market for a better deal.

With returns likely to fall further as companies implement the last couple of months of base rate cuts it is advisable to switch to a fixed rate ISA in order to protect your savings against future drops. Fixed rate deals generally offer interest rates at the top end of the market.

The one and only catch with a fixed rate deal is that they also have a fixed term meaning once you put the money into the account you have to leave it there for between one and three years. If you have to make a withdrawal in the fixed term then you lose the higher rate on all your savings for the entire period and will probably face a almost non-existent interest rate.

There is an argument for waiting a short while before searching for an ISA since companies historically offer up premium rates towards the end of the tax year hoping to gain market share from those who invest their ISA allowance on the first day of the new tax year. Rates as much as half a percentage point above market levels are common.

It is important to remember that interest gained from an ISA is tax free making them far better than even the best easy access savings accounts. Switching to a fixed rate deal is worth considering now if you want to lock in high rates.

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4. SBI’s 1000 days Fixed Deposit(FD)
5. SBI’s Term Deposit Interest Rates in 2009