ISA providers have intensified competition by raising rates and launching new deals since the start of 2019, signalling good news for savers.
The latest research from Moneyfacts.co.uk reveals that 24 savings providers have increased rates or launched new ISAs, with some securing a Best Buy position in the process. Some of the best deals included that from Virgin Money, offering a rate of 1.45% on its easy access ISA; Cynergy Bank, offering a rate of 1.73% on its one-year fixed ISA; and Coventry Building Society, offering a rate of 1.90% on its two-year fixed rate ISA and 2.30% five-year fixed rate ISA.
"It's encouraging that the ISA market is showing signs of life so early on in the year, with providers increasing rates and launching new deals, some of which now offer market-leading rates," said Rachel Springall, finance expert at Moneyfacts.co.uk. "In fact, 15 providers have upped rates and 10 providers have launched fresh deals since the start of 2019.
"Savers may well be looking towards the short-term market for an ISA due to growing economic uncertainties. In the easy access ISA market, Shawbrook Bank, Tesco Bank and Yorkshire Building Society have upped their rates and feature in the top 10 best deals in the market, sitting just shy of the market leader Virgin Money.
"A stream of increases can also be seen in the fixed ISA market, with the one-year fixed sector seeing the most competition as Charter Savings Bank, Chelsea Building Society, Coventry Building Society, Cynergy Bank, Dudley Building Society and Yorkshire Building Society have all improved their rates and taken positions in the one-year fixed ISA Moneyfacts.co.uk Best Buys as a result.
"Despite this glowing positivity, it is worth noting that fixed rate bonds and easy access outside of an ISA wrapper generally pay better returns, especially when considering the market leaders. The Personal Savings Allowance that came into effect in April 2016 has had a negative impact on the appeal of ISAs, which is still felt today almost three years on. There are also more challenger banks outside of the ISA market too, as well as more activity generally in the fixed bond market.
"The best easy access rate outside of an ISA wrapper (based on a £10,000 investment) currently comes from ICICI Bank UK, paying 1.54% while the best one-year fixed bond comes from Al Rayan Bank, an Islamic bank, offering 2.15% gross as an expected profit rate. In real terms, may of the cash ISAs available on the market fail to outpace the impact of inflation. In fact, only three deals can beat 2.1%, the current level of inflation (CPI).
"Clearly, providers are sowing the seeds for savers to discover market-leading returns, and as the ISA season flourishes, it will hopefully lead to increased competition and even better deals as we move closer to the new tax year."
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.