More choice for ISA savers as interest rates stabilise | moneyfacts.co.uk

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 03/09/2020

Interest rates on cash ISAs appear to be stabilising for the first time in seven months according to data from Moneyfacts.co.uk. The hope is that the this will mark the start of increased competition by the banks for ISA funds over the coming months.


Interest rates first took a hit after the Bank of England cut base rate from 0.75% to 0.25% on the 11 March 2020 and then again on 19 March to 0.10% in response to the Coronavirus pandemic. On 1 March 2020 average ISA rates ranged between 0.83% gross for easy access and 1.47% gross for a five-year fixed term. Since then rates have fallen consistently every month with the average five-year rate paying less than 1% in August 2020. The beginning of September 2020 is the first time in seven months where ISA rates have remained steady or increased compared to the prior month. One-year fixed rate ISAs and five-year fixed rate ISAs have both seen their average rate increase, while easy access and two-year fixed rates have remained the same.


However, while average rates appear to be starting to improve, the very best ISA rates have faltered at the start of September after having started to increase in August. On 7 August 2020 the best rates for easy access, one, two and five-year fixed rate ISAs had all increased compared to those available on 2 July 2020. By 2 September 2020 all had reduced, with everything except the best five-year fixed rate ISA now below 1.00% gross. The higher rates in August came thanks to NS&I on easy access and Sharia’a challenger banks for the fixed term bonds. To date the best rate or expected profit rate for a five-year fixed rate ISAs has had the smallest reduction from 1.50% to 1.40%.

Table 1 Source: Moneyfacts Average ISA rates

 

01 March 2020 Rate Gross

01 August 2020 Rate Gross

01 September 2020 Rate Gross

Easy Access

0.83%

0.32%

0.32%

One Year Fixed

1.14%

0.56%

0.58%

Two Year Fixed

1.11%

0.63%

0.63%

Five Year Fixed

1.47%

0.99%

1.09%

 

 

 

 

 

 

 

 

 

What are the best ISAs right now?

You can find the best ISAs currently available in our weekly ISA round up.

The choice for ISA savers also appears to be increasing with more easy access, two-and five-year ISAs available at the start of September than compared to August, while the number of one-year fixed rate ISAs has remained the same.

Table 2 Source: Moneyfacts.co.uk ISA product counts

 

01 March 2020

Number of ISAs

01 August 2020

Number of ISAs

01 September 2020

Number of ISAs

Easy Access

149

123

126

One Year Fixed

70

63

63

Two Year Fixed

81

61

71

Five Year Fixed

28

20

25

 

Savers will need to wait and see if the increased choice of ISAs will develop into more rate competition for the very best ISA rates and this could be sign of banks gearing up for the mini ISA season that takes place between September of October.
However, with banks and building societies able to access funding at interest rates at or near to base rate from the Government’s Term Funding Scheme until 2021. This money from the Government is provided over a fixed four-year term and is likely to keep savings rates for consumers deflated for some time.

Find the best ISA rates and accounts

Our charts the best ISA rates available. You can personalise your search to suit how you want to open and manage your account and based on the amount you want to save.

See the best ISA rates.

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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