Savings News

Revolut has been making headlines with the launch of its easy access savings account offering a highly competitive rate, but this account might not be as attractive as it first seems.
Savings Vault, the new easy access account launched by Revolut, offers savers 1.35% AER which is the second best rate currently available in the easy access chart. The drawback with this account is that it is only available to customers with a Revolut Metal account, which charges customers £12.99 per month. This means that for customers to earn money on their savings, factoring in the £12.99 charged each month, they will need to have just over £11,500 saved in the Savings Vault account.

For existing Revolut Metal customers who are already prepared and benefiting from paying £12.99 per month to use the account, Savings Vault is a highly attractive account. However, for those looking for an easy access account in which to save, there are more attractive accounts available. It should also be noted that Revolut has announced it plans to open a version of Savings Vaults for its Revolut Premium and Standard customers, albeit offering a lower rate.

This week hopes of a highly competitive ISA season were dampened with the news that average cash ISA rates are at their lowest levels since 2018. In fact, research carried out by Moneyfacts.co.uk found that this month the average easy access ISA rate had fallen to 0.85%, while the average notice ISA had dropped to 1.12% and the average one-year fixed ISA had dropped to 1.15%. At the top of the charts, a number of providers reduced their rates including UBL UK, which had been topping the charts for over a month. There was some good news for savers this week, however, as Hampshire Trust Bank increased the rates on two highly competitive short-term ISAs earlier in the week .

It should be noted that the rates below are the best rates available on Thursday and, although correct at the time of publishing, they may not be available on Friday.

Savers looking to deposit their funds into a short-term ISA will be pleased to see that Hampshire Trust Bank has increased the rates on two of its ISAs today, which are now offering chart-topping rates.

This increase in ISA rates means that Hampshire Trust Bank now offers the best rate overall in the two year fixed ISA chart and the best rate, without any opening restrictions, in the one year fixed ISA chart. Its 2 Year ISA Bond (Issue 4) offers 1.61% AER, which is 0.06% higher than the next best rate in the two year chart, while its 1 Year ISA Bond (Issue 5) pays 1.41% AER. Both these ISAs pay interest on their anniversaries and require just a £1 opening minimum deposit. They also allow transfers in and, unusually for fixed ISAs, permit earlier access, but these are subject to a 90 day interest loss penalty. Both can be opened online or by post and then managed online, by post and by phone.

Savers hoping to see a competitive ISA season this spring may be disappointed to see that average cash ISA rates are at their lowest levels since 2018.

Research carried out by Moneyfacts.co.uk has found that this month the average no notice ISA rate has fallen to 0.85%, the lowest it has been since August 2018 when it stood at 0.82%. Meanwhile, the average rates on fixed and notice ISAs have also seen disappointing returns. The average notice ISA dropped to 1.12%, the lowest it has been since October 2018 when it stood at 1.11%, and the average one-year fixed cash ISA rate fell to 1.15%, its lowest level since March 2018 when it offered 1.12%. The only area to remain unchanged month-on-month was the average longer-term fixed ISA rate, which stood at 1.37% this month.

In addition to this, competition within the ISA charts has also decreased. The number of live cash ISAs has fallen to 397, which is down by 18 products month-on-month, this is the lowest count since May 2018 when ISA savers had 393 products to choose from.

Cash ISA market analysis 

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

Commenting on the fall in ISA rates, Rachel Springall, finance expert at Moneyfacts, said: “It will be disappointing news for savers to find out that ISA rates are deteriorating at a time when some may well be looking to take advantage of their ISA allowance in the run-up to a new tax year. Our analysis highlights the importance for both consumers and providers alike to keep a close eye on the changing market.

“During December 2019, there were ISAs withdrawn and several rate cuts made in both the variable and fixed ISA markets. It appears that these changes are in response to a market adjustment, with savings providers finding themselves too close to the top of the rate tables and so may either see their product oversubscribed for or struggle to cope with demand.

“In the run-up to April, there tends to be high anticipation for a spike in competition in interest rates on offer with ISAs, but with the state of the market as it stands and murmurings of a potential base rate cut by the Bank of England gaining momentum, ISA rates could in fact be worse than they are right now.

"ISA savers may be looking towards the next Budget announcement for more positive news, as the Government could boost the £20,000 limit for tax-free savings. Savers also have the Personal Savings Allowance, which can be an additional way to negate tax on savings interest – however, there is no guarantee that this allowance will be around forever. Fixed cash ISA rates may not be as attractive as fixed rate bonds as it stands, but the longer-term benefits of an ISA should not be overlooked.

“Savers will be eagerly waiting to see if competition increases over the next few months, but it would be wise to compare rates now in case they fall further – particularly on easy access cash ISAs where they could always transfer elsewhere should a better deal arise.”