Choice Returns to ISA Market but Rates Stagnate | moneyfacts.co.uk

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Rachel Springall

Rachel Springall

Finance Expert & Press Officer
Published: 15/02/2022

Good news for savers as ISA product choice is growing once more after a dramatic drop between 2020 and 2021. Research from Moneyfacts.co.uk has revealed there are now 56 more ISA options available to consumers than this time last year, although that is still 26 fewer than in February 2020. Between 2020 and 2021 there was a large contraction in the market, with 82 ISA products disappearing from the shelves. 

This month savers can pick from 1,223 live savings account options and 379 tax-efficient ISAs, making 1,602 in total. There are now more providers offering savings products across the market than Moneyfacts has seen since its records began in 2007.

Now that choice is returning, how are interest rates stacking up?

There was no change to the average easy access ISA and notice ISA interest rates for the third month running in February, but long-term fixed bonds and ISA have seen their rates inch higher for the eighth month in a row.

 

The average one-year bond rate rose from 0.80% to 0.82% month-on-month, while the average long-term fixed bond rate rose to 1.22%, its highest level since April 2020. A long-term bond or ISA is defined as one with a term of more than 550 days.

 

The average rate on a one-year fixed ISA, meanwhile, rose from 0.57% to 0.59%, its highest level since October 2020.

The average rate on a notice savings account is now 0.54%, down from 0.57% in January but significantly more than the 0.37% available on the average notice ISA.

Easy access ISA rates stayed the same between January and February, with the average remaining stagnant at 0.26%, while easy-access savings accounts saw their average interest rate creep up from 0.20% to 0.21%.

ISA season hard to call

Rachel Springall, finance expert at Moneyfacts, said there is no guarantee rates will rise as ISA season kicks off.

 

“Savers who are looking to lock into a fixed rate account for a year or more may be pleased to see average rates rise month-on-month,” she said. “However, consumers who are starting to compare ISAs will notice a stark difference between average fixed ISA returns compared to fixed bonds, and those looking at easy access ISAs and notice ISAs will be disappointed to see the rates stagnate for the third month running. This does not bode well for a bustling ISA season, but with base rate rising, many savers may hope to see rates rise in the weeks to come, but there is no guarantee this will come to fruition.”

 

She noted also that product choice is increasing, but there are still a lot of providers who don’t have an ISA in their product suite.

“There are now more providers offering live products within the savings market than we have seen since our records began in 2007. However, out of the 134 savings providers, only 86 offer an ISA. As it stands there are therefore 48 providers who do not currently offer an ISA product, and this has risen from 38 year-on-year. Savers may then see brands offering more competitive returns outside of an ISA wrapper, but they will need to consider any Personal Savings Allowance (PSA) if they are chasing the top returns, particularly when it comes to fixed rates,” said Springall.

“ISA choice has grown year-on-year, but rates still have a way to go to echo those offered before the pandemic.”

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