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ISA season in full swing as rates and choice rise

ISA season in full swing as rates and choice rise

Category: ISAs
Author: Leanne Macardle
Date: 18/03/2019

This year's ISA season is in full swing, and those yet to use their ISA allowance for the 2018/19 tax year will be pleased to learn that providers are pulling out all the stops, as not only are rates rising, but product choice has already surpassed last year's peak!

That's according to data from the latest Moneyfacts UK Savings Trends Treasury Report, due to be published later this week. The figures show that there were 383 ISAs to choose from at this point a year ago, rising to 399 a month later (April marking the peak of ISA season). Yet this year, these levels have already been beaten – a month prior to the new tax year starting – with 415 deals now available, fuelled by a rise in provider activity.

Not only that, but rates are increasing, with averages already surpassing those seen last April. Indeed, the average one-year fixed rate ISA now stands at 1.37%, up from 1.12% in March 2018 and 1.16% in April of the same year, marking a notable rise of 0.25% year-on-year. A similar pattern can be seen in both longer-term and no notice ISA rates, as the table below highlights:


Product numbers and rates


Mar 2018


Apr 2018


Jan 2019


Mar 2019


Number of live ISA products


383


399


408


415

Average one-year fixed ISA


1.12%


1.16%


1.35%


1.37%


Average longer-term fixed ISA*


1.48%


1.52%


1.60%


1.62%


Average one-year fixed bond


1.19%


1.22%


1.43%


1.47%


Average longer-term fixed bond*


1.68%


1.69%


1.86%


1.89%


Average live no-notice ISA


0.79%


0.81%


0.95%


0.96%


Average closed no-notice ISA


0.71%


0.74%


0.80%


0.81%

*Longer-term fixed bonds are those with terms over 550 days. Source: Moneyfacts Treasury Reports

"The latest ISA season shows great signs of improvement, with the choice of deals already breaking the levels seen during the peak in 2018," said Rachel Springall, finance expert at Moneyfacts. "It is encouraging to see providers fully on board with ISA season this year, with some launching market-leading rates to grab the attention of keen savers. The market is gradually improving at rate level, too, so savers would do well to check their existing accounts."

The data goes on to reveal that closed ISAs – those no longer accepting new business – pay less than their live counterparts, so if you've been saving into the same ISA for years, you may be missing out on a higher return. As the table above demonstrates, the average no notice ISA rate on a closed account pays 0.81%, whereas live deals pay 0.96%, so it could pay to compare the options and see what else is out there.

In the fixed sector, the one concern for some savers could be that fixed rate ISAs
typically pay less than standard fixed rate bonds, but the long-term benefits of saving within an ISA wrapper means this perhaps shouldn't be too much of a concern. ISAs allow savers to keep their cash entirely tax-free, regardless of how much is saved over the years, which means there'd be no need to worry about breaching the Personal Savings Allowance in the future (find out more about it here).

Overall, the latest figures bode well for savers looking to make the most of their tax-free allowance, but as is the case every year, they may not want to hang around if they're looking to secure the best deal. "As the ISA season comes to its peak, savers would do well to move any older ISA pots if they haven't done so already," said Rachel, "as well as study the top ISA rates before competition fizzles out."

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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