ISA interest rates on the up as banks vie for your savings

Julian Knight looks at the best offers available as the deadline looms

After a slow start, the competition for your savings in advance of the deadline for investment in a cash Individual Savings Account this year is starting to hot up. Each tax year, Britons can put up to £5,100 in a cash ISA with all interest earned being free of tax. The deadline for this year ISA is a little over three weeks away.

A month ago, the best-buy instant-access cash ISA was paying just 2.9 per cent; now, it's 3.35 per cent from the AA. Likewise, a raft of fixed-term deals has come on to the market, including a four-year fixed rate ISA from Cheshire Building Society, paying 4.4 per cent, and a five-year fix from Skipton Building Society paying 5 per cent, nearly identical to the current rate of inflation.

"The variable rate ISA market has been competitive, but three of the top four accounts don't accept transfers in," warns Michelle Slade from financial information site Moneyfacts. "Barclays and Santander have battled it out to be top of the best buys, but have been overtaken last week by the AA. The fixed-rate ISA market has also seen a lot of movement, particularly for medium to long term fixed-rate ISAs. At present, the average ISA rate is at its highest level for the whole two-year period of base rate being at 0.5 per cent."

But with Bank of England interest rates almost certain to rise over the next few months and many City insiders predicting rates rising from 0.5 per cent to 1.5 or 2 per cent within the year, what seems like a good deal now may not prove to be the case later on.

"I'd be reluctant to fix for longer than two years .... The exception to this may be for those people looking to maximise their monthly interest to supplement their income," says Andrew Hagger, spokesman for comparison site Moneynet.

Kevin Mountford, of comparison service, has a different interpretation: "As far as fixed versus variable rates are concerned, you need to decide if you can lock your money away. If you can, then the best value is around five-year products ... and you can transfer-in your existing ISA portfolio. For shorter-term options the value isn't as great and I'd stick with the easy-access offers and look again in another year."

Loyalty is rewarded by two providers in the ISA market – the Halifax and Santander, who offer a 0.2 per cent bonus to current-account customers who also take out an ISA. With the bonus the accounts pay 3.2 per cent and 3.5 respectively. But more standard account bonuses can be a double-edged sword: "Once the bonus rate expires from the latest deals the new Santander Flexible ISA rate will drop by a massive 2.65 per cent, the AA by 1.65 per cent and the new Barclays deal by 1 per cent, so it's vital that you make a note in your diary or iPhone to switch your balance after the year is up," Mr Hagger warns.

And the run up to ISA deadline isn't just about where to put new savings, it should be about reviewing existing arrangements. "Just because the rate was a best buy when you took it out, doesn't mean you'll still be getting a good deal. In fact some old accounts are paying as little as 0.1 per cent."

And if you are transferring money between cash ISA providers be aware that new FSDA rules mean the transfer should be complete within 15 days. Halifax and Nationwide have, however, both promised to pay interest from the day the account opening application is received.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Business Analyst - Financial Services - City, London

    £50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

    SThree: Trainee Recruitment Consultant

    £18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

    Recruitment Genius: Administrator - IFA Based

    £22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

    Day In a Page

    Major medical journal Lancet under attack for 'extremist hate propaganda' over its coverage of the Israeli-Palestinian conflict

    Lancet accused of 'anti-Israel hate propaganda' over coverage of Gaza conflict

    Threat to free speech as publishers of renowned medical journal are accused of inciting hatred and violence
    General Election 2015: Tories and Lib Dems throw their star names west to grab votes

    All noisy on the Lib Dems' western front

    The party has deployed its big guns in Cornwall to save its seats there. Simon Usborne heads to the heart of the battle
    How Etsy became a crafty little earner: The online market has been floated for £1.2bn, but can craft and capitalism coexist?

    How Etsy became a crafty little earner

    The online market has been floated for £1.2bn, but can craft and capitalism coexist?
    Guy Ritchie is the latest filmmaker to tackle King Arthur - one of our most versatile heroes

    King Arthur is inspiring Guy Ritchie

    Raluca Radulescu explains why his many permutations - from folk hero to chick-lit hunk - never cease to fascinate
    Apple Watch: Will it live up to expectations for the man or woman on the street?

    Apple Watch: Will it live up to expectations?

    The Apple Watch has apparently sold millions even before its launch tomorrow
    Don't fear the artichoke: it's a good cook's staple, with more choice than you'd think

    Don't fear the artichoke

    Artichokes are scary - they've got spikes and hairy bits, and British cooks tend to give them a wide berth. But they're an essential and delicious part of Italian cuisine
    11 best men's socks

    11 best men's socks

    Make a statement with your accessories, starting from the bottom up
    Paul Scholes column: Eden Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo

    Paul Scholes column

    Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo
    Frank Warren: Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal

    Frank Warren's Ringside

    Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal
    London Marathon 2015: Kenya's brothers in arms Wilson Kipsang and Dennis Kimetto ready to take on world

    Kenya's brothers in arms take on world

    Last year Wilson Kipsang had his marathon record taken off him by training partner and friend Dennis Kimetto. They talk about facing off in the London Marathon
    Natalie Bennett interview: I've lost track of the last time I saw my Dad but it's not because I refuse to fly

    Natalie Bennett interview: I've lost track of the last time I saw my Dad

    Green leader prefers to stay clear of her 'painful' family memories but is more open about 'utterly unreasonable' personal attacks
    Syria conflict: Khorasan return with a fresh influx of fighters awaiting the order to start 'shooting the birds'

    Khorasan is back in Syria

    America said these al-Qaeda militants were bombed out of the country last year - but Kim Sengupta hears a different story
    General Election 2015: Is William Cash the man to woo Warwickshire North for Ukip?

    On the campaign trail with Ukip

    Is William Cash the man to woo Warwickshire North?
    Four rival Robin Hood movies get Hollywood go-head - and Friar Tuck will become a superhero

    Expect a rush on men's tights

    Studios line up four Robin Hoods productions
    Peter Kay's Car Share: BBC show is the comedian's first TV sitcom in a decade

    In the driving seat: Peter Kay

    Car Share is the comedian's first TV sitcom in a decade. The programme's co-creator Paul Coleman reveals the challenges of getting the show on the road