The Chancellor's announcement in April that the ISA limit would increase to £15,000 was met with high hopes from the industry and savers alike. It looked like the tide would start to turn, and there was expectation that rates would gradually increase and providers would be looking to tempt savers with new rates and top-performing accounts.
Unfortunately, that hasn't yet happened. Despite the hype surrounding new ISAs and the limit set to be introduced in just a week's time, it seems that providers aren't getting in on the action. In fact, it's quite the opposite.
Research from Moneyfacts.co.uk can reveal that, even though the number of cash ISAs available is slowly edging up, rates aren't following suit. Nor have they even levelled out – instead, the rates on offer are continuing to fall across the range.
The figures show that the average variable rate cash ISA paid 1.26% in April, the time of the Budget announcement, but this has fallen to 1.21% today – a drop of 0.05%. It's an even worse story for one-year fixed ISA rates, with the average falling by 0.10% over the same period to stand at 1.48%, and in fact it's only the five-year fixed ISA rate which has witnessed any improvement.
Sylvia Waycot, editor at Moneyfacts.co.uk, comments on the findings:
"All hopes were pinned on July being the month our savings might start to offer a worthwhile return, but even the new £15,000 ISA limit has not sparked any interest from providers – literally.
"Shockingly, the average rate on variable and one-year fixed ISAs has fallen since the Chancellor's announcement in April whereas the non-ISA equivalents have had no such downward movement, and in fact only the five-year fixed ISA shows a positive story – the average rate there has increased by 0.08%."
So, far from fuelling the market, the Budget announcement has left it more subdued than ever. However, that doesn't mean you should turn your back on ISAs altogether and nor should you necessarily opt for a long-term fixed account, despite the higher rate, as with an increase in base rate imminent it might be wise to see how the savings landscape lies rather than tying your money up for the foreseeable future.
As Ms Waycot adds: "Whilst the drop in rates can't be anything but disappointing for ISA savers, do remember to use as much of your entitlement as you can. And, if you're worried about getting locked into a long-term fixed rate, keep your savings more liquid in a shorter term – the important thing is it must always be within an ISA wrapper."
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