Banks and building societies have increased cash Isa rates in recent weeks but now the process has stalled, said Anna Bowes, founder of savings rate tracking service Savings Champion. “That’s disappointing as we get closer to the end of the tax year, but there are still some attractive rates available right now.”
Cash Isa rates could soon start falling instead after consumer price inflation dropped more than expected in February to just 3.4 percent.
Inflation could hit two percent as soon as next month, which would pile even more pressure on the Bank of England to cut base rates.
As soon as we get that first cut, savings rates will fall and probably beforehand as banks and building societies jump the gun.
Savers can put up to £20,000 in a cash Isa and there is no time to lose, Bowes added. “It feels like rates may have hit the peak now, so anyone looking to open an Isa for this tax year might want to get a move on.”
The good news is that savers are finally getting an inflation-busting return.
By choosing a fixed-rate cash Isa, they can lock into today’s rates for up to five years, no matter what happens to inflation and interest rates.
However, savers must be able to tie up their money for the full term of a fixed-rate bond, as there are penalties for early withdrawals.
Bowes said a whole “gang” of providers offer one-year fixed rate bonds paying just over five percent, led by OakNorth and Kent Reliance who both pay 5.07 percent, with Paragon and Aldermore paying 5.05 percent.
“Virgin Money beats them all by paying 5.25 percent, but only if you have its current account, or open one.”
As always, check the minimum deposit, as this can vary. For example, OakNorth’s minimum is just £1, but that rises to £500 with Paragon and £1,000 with both Kent Reliance and Aldermore.
The longer the fixed rate, the less interest you get. For example, Skipton Building Society offers an 18-month fix paying 4.75 percent, while OakNorth and Close Brothers pay 4.70 percent for two years.
Over three years, Aldermore pays 4.50 percent, although Close Brothers has increased its rate to 4.40 percent.
Inevitably, five-year bonds pay less, with UBL paying 4.16 percent followed by Close Brother’s 4.15 percent.
Most of these rates can only be accessed online or via mobile savings app, but Skipton allows savers to open their account by post, telephone or branch, while UBL offers postal opening.
Those uncomfortable saving online should checking what their local building society offers, if they have a local branch. They often combine attractive rates with a more personal service.
READ MORE: Four in five savings accounts now beat inflation – top 10 savers and ISAs today
The high street banks rarely trouble the best buy tables but may tempt those lucky enough to still have a local branch. The Barclays 1-Year Flexible Cash Isa pays a fixed rate of 4.6 percent.
Savers who want easy access to their money rather than locking it away can get variable rates of more than five percent, but these will fall when interest rates are cut.
The Moneybox Cash Isa now pays 5.11 percent, leapfrogging Chip whose cash Isa was previously topping the best buy table paying 5.10 percent. Zopa, Virgin and Charter Savings Bank also pay more than five percent.
These are brilliant rates but may not last much longer, Bowes. “This could be your last chance.”
Today’s highest paying easy access Isa actually beats the best non-Isa version, Cynergy Bank’s 5.10 percent rate, Bowes added.
This is good news for savers with larger sums in standard savings accounts, who risk exceeding their personal savings allowance and paying tax on their interest.
Just don’t leave it too long. If inflation does fall to two percent next month, rates on cash Isas and standard savings accounts will fall, possibly at speed.
