25th August 2015 by Anna Bowes
The last few weeks have seen a flurry of improved fixed rate cash ISA deals hit the market and various new entrants to the best buy tables.
August had already seen new market leading rates launched by Holmesdale Building Society (1.75% for 1 year) and Leeds Building Society (2.30% for 3 years) and there have been even more new best buys in the last week.
Tesco Bank (1.75%) joined a variety of providers at the top of the 1 year fixed rate ISA table and Principality Building Society entered the 2, 3 and 5 year tables. Marsden Building Society has launched a new best buy ISA paying up to 2.05%, fixed until October 2017. Contrary to the current trend in the savings market, even a high street provider, Halifax (1.60% for 1 year) improved its rate, making it more competitive and breaking into the top ten for the term as a result.
It is worth noting that Building Societies are well represented in these improved deals, with several lesser known names entering the best buy tables. This is in stark contrast to the fixed rate bond best buys, which do not contain a single account from a building society at the moment.
With all of these changes happening this month, savers may be wondering what is happening, particularly after such an underwhelming ISA season this year. Savers may be debating about whether to go ahead with a fixed rate or to wait and see what happens next. Certainly those who are yet to invest in a cash ISA this tax year, could be watching this space.
With many speculating about when we will see an increase in the Base Rate, some savers will be wary about tying into a fixed rate account. But with little consensus as to when the rate will increase and the distinct possibility of any change being gradual, a fixed rate account shouldn’t necessarily be discounted and in fact, a balanced portfolio containing both variable rates to take advantage of a change in the base rate and fixed rates to help to maximise returns could be the sensible choice.
The new Personal Savings Allowance being introduced in April 2016 may also be having an effect on the popularity of ISAs. With the prospect of a basic rate taxpayer being able to earn £1,000 in interest before being taxed and the interest rates on fixed rate bonds significantly outstripping the ISA equivalents, savers may question the need for a cash ISA. However, it is worth remembering that a balance held in a cash ISA remains tax free, whereas the amount you can hold in an account to earn tax free interest through the Personal Savings Allowance will reduce as and when rates rise.