ISA interest rates on the up as banks vie for your savings
Julian Knight looks at the best offers available as the deadline looms
Sunday 13 March 2011
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 Moneysupermarket.com, 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; request a free guide on NISAs from Hargreaves Lansdown
Simon Read: There may be trouble ahead for cohabiting couples who don’t make a will
Mark Dampier: Strong returns can be found if you go the opposite way to the crowds
Money Insider: Would £150 make you switch banks?
Gold-plated pensions – the key to retirement freedom?
Bargain Hunter: Find the deals that have real value beneath the Black Friday hype
- 1 To help fuel their propaganda machine against the poor, our government has now decided to redefine the word 'welfare'
- 2 Anti-gay hate preacher accidentally tweets 4,000 followers cartoon clip of him 'confessing' to be a 'homosexual sodomite'
- 3 Woman opens professional cuddling shop – gets 10,000 customers in first week
- 4 Grayson Perry: London needs affordable housing because 'rich people don't create culture'
- 5 Kenya bus attack: Al-Shabaab militants kill 28 non-Muslims who failed to recite Koran
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
Rochester by-election: Labour MP Emily Thornberry resigns after posting white van and England flags tweet
France 'blocks' Russian sailors from boarding a warship
Revealed: How the world gets rich – from privatising British public services
Myleene Klass: Ed Miliband 'strikes back' by comparing UK's need for Labour's mansion tax to Hear'Say track
iJobs Money & Business
Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...
Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...
£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens