More choice for savers as number of cash ISAs rises to near six-month high

With 520 cash ISAs on offer, the last time there was more choice was November 2023.

Savers seeking tax-free returns on their hard-earned cash are spoiled for choice as the number of ISAs available rose to a near six-month high at the start of April.

This is according to data from the Moneyfacts UK Savings Trends Treasury Report, which found consumers had 520 cash ISAs to compare on a first-of-month basis. Choice was last greater in November 2023, when product counts stood at a marginally higher 526.

There’s further reason for savers to be pleased, as many of the average ISA rates saw a slight uptick month-on-month.

The average easy access ISA rate increased to pay 3.38% at the start of April, up from 3.32% the previous month. Similarly, the average notice ISA rose from 4.12% to 4.15% within the same period.

Meanwhile, those looking to lock in a fixed rate will find shorter-terms continue to outperform their longer-term counterparts amid ongoing expectations for the Bank of England to drop its central interest rate in the near future.

This can be seen as the average one-year fixed ISA rate increased to pay 4.51% at the start of April, following five months of consecutive cuts.

By contrast, the average rate for a longer-term ISA (with terms of over 550 days) fell to 4.07% - its lowest rate since June 2023.

The effect of ISA season?

Greater product choice and higher rates in the ISA market this month were likely driven by ISA season – a phenomenon which occurs annually as providers attempt to entice new customers with attractive deals at the start of a new tax-year.

However, wider economic factors are also at play, as both product choice and average interest rates are significantly higher than a year ago. In April 2023, savers had just under 50 fewer products to choose from, with the average easy access ISA paying 2.15% and the average one-year fixed ISA offering 3.68%.

What’s more, this year has also seen new providers enter the cash ISA market. In February, Chip launched its first cash ISA, closely followed by Plum introducing its Plum Cash ISA in March. Since their launch and at the time of writing, both this account and the Chip Cash ISA (powered by ClearBank) feature at the very top of our easy access ISA chart.

What about the savings market?

Outside of the cash ISA market, savings accounts fared less well on a monthly basis. The average easy access savings rate fell from 3.18% to 3.11% between March and April, while the average notice rate held at 4.27%.

Likewise, the average rate paid by a one-year fixed bond experienced a slight drop of 0.01 percentage points to 4.60% at the start of the month, while the average longer-term fixed rate remained at 4.13%.

Reassuringly, Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, noted months of “fixed rate cutting turmoil” has seemingly “dissipated”, with average rates seeing a much more marginal decline than before.

Furthermore, she highlighted the average shelf-life of a fixed bond rising to 36 days from 27 days a month previously is indicative of a more stable savings market.

“These movements will make it easier for providers and consumers to keep abreast of changes, but could also calm any knee-jerk rate cutting from providers who find themselves too far up the top rate tables and unable to cope with demand,” Springall explained.

Less volatility will no doubt come as welcome news to savers who regularly review top savings rates. Nevertheless, with providers – especially challenger banks – able to amend their offerings at short notice, they should continue to monitor how their savings accounts are performing and consider switching if more competitive returns are available.