Number of fixed-rate ISAs soar
The number of fixed-rate ISAs available has soared 10-fold during the past decade as banks have become increasingly reliant on using savers' money to fund their mortgage lending, research indicated today.
There are currently 139 fixed-rate ISAs on the market, compared with just 14 10 years ago, according to financial information group Moneyfacts.co.uk.
The choice of the products is also substantially higher than it was only two years ago, when there were 56 products, while it is also up on the 93 fixed-rate ISAs available in 2010.
The group attributed the rise in the number of accounts to lenders' reliance on using money deposited with them by savers to fund their mortgage lending following the credit crunch.
Under the terms of the majority of fixed-rate ISAs, people cannot access their money until the fixed-rate period has expired, giving banks more certainty over how long they will have the cash for.
As is the case with other fixed-rate products, banks tend to reward those who lock up their money for longer periods with higher rates.
Michelle Slade, spokeswoman for Moneyfacts.co.uk, said: "The increased need to attract savers' money has led to a surge in the number of fixed-rate ISAs on the market.
"Savers are less likely to withdraw tax-free savings over standard savings, making them a key market for providers looking to use in-house funding sources for lending activities.
"If savers have fully utilised their ISA allowance each year since launch they could now have a tax-free savings pot of around £70,000.
"Providers are keen to not only attract such sizeable balances, but to also keep them, making fixed-rate ISAs a target market."
Skipton Building Society is currently offering the best five-year fixed-rate ISA at 4.5%, while Bank of Cyprus UK has the best one and three-year rates at 3.3% and 4.1% respectively.
Ms Slade said: "Savers looking to fix for longer periods need to consider that the rate may be far less competitive in a few years' time when Bank base rate has risen from its current all-time low.
"If ISA savers want to ensure they benefit from base rate rises as they occur, then variable-rate cash ISAs may be a more suitable option."
People can save up to £10,200 into an ISA during the current tax year, up to £5,100 of which can be paid into a cash ISA.
From April 5, the annual ISA allowance will increase to £10,680, of which £5,340 can be saved in a cash ISA.
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