The best buy marketplace has calmed dramatically over the last couple of weeks – we had to see a slow down to the good times eventually. However there have still been some interesting developments in the easy access market and fixed rate ISA tables that I promised to review for you this time around.
How are cash ISAs faring compared to their non-tax-free cousins?
RATES ARE CORRECT AS AT THE TIME OF PUBLICATION (04/08/2023). All up-to-date rates can be found on our Best Buy tables.
Let’s start with the Easy Access table.
Whilst there has been a lot of activity in the Easy Access table the top rate on offer is actually lower than it was. But, all is not lost as the best paying unrestricted easy access account is paying a little more.
The Chorley Building Society Easy Access Saver (1 withdrawal) paying 4.65% was withdrawn at the beginning of last week. However, Paragon Bank was quick to take advantage and launched its own restricted access account called Double Access Account Issue 1 paying 4.60% AER. As the name suggests, you can make just two penalty free withdrawals a year – any more and the rate drops to 1.50% AER.
But this was quickly challenged by the Nottingham Building Society which launched Bonus Saver August 2024 also paying 4.60% but this account does not have any restrictions on the number of withdrawals that can be made each year. However, the rate does include a bonus of 2.10% AER until 31/08/2024.
Shawbrook was the next to make a move and pipped Nottingham BS by increasing the rate on its Easy Access Account Issue 36 – for both new and existing customers, to 4.63% AER.
And while no one else has challenged Shawbrook for the top spot, several others have launched both restricted and unrestricted access accounts paying 4.60% pushing up the average rate of the top five from 4.53% to 4.61%.
Following the latest base rate rise, will there be more to come?
What a difference a couple of weeks makes!
I’m afraid it looks like the fixed rate markets may have peaked for the time being – it was only a matter of time. There’s been very little activity across all the terms, and the top rates available remain either largely unchanged or in some cases lower than two weeks ago.
1 Year
Atom Bank started and almost finished the last two-week period in the top spot with a bond paying 6.05% AER. However, Smart Save is back on form and pipped Atom at the last minute with a bond paying 6.06% AER. There have also been a couple of bonds paying just slightly less than this, introduced into the top five, so the average has increased very slightly to 6.03% from 6.02%.
Cynergy Bank is one of these, currently in third place with a bond paying 6.04%.
There was a small window of opportunity for a few days at the end of July when Nottingham Building Society, under the Beehive brand, launched a bond paying 6.13% AER - but it was only available for three days.
2 Years
I’m afraid the news from the 2-year table is no better. In fact the top rate on offer as we head into the weekend is lower than it was two weeks ago, as Tandem withdrew its bond paying 6.15%. As in the 1-year table, Nottingham Building Society went briefly to the top following the demise of Tandem, with a bond paying 6.10% - but this too was withdrawn after just a few days.
Cynergy is the only other provider to have launched an improved bond and subsequently is in the top spot paying 6.06% but there have been a number of withdrawn bonds, which means that older bonds that had previously been pushed out of the top five have reappeared!
3 Years
In the 3-year table it was the Melton Building Society making a brief market leading appearance in the last couple of weeks, with a bond paying 6.10% - some 0.10% higher than the previous best. But it was withdrawn earlier this week. Cynergy has again taken advantage of the situation and launched a bond paying 6.01%, so stealing the top place ahead of RCI Bank paying 6%. The other three accounts in this table are still paying less than 6% - and all in all less than the shorter-term bonds, indicating that the market still believes rates are close to peaking before falling away again over the next couple of years or so.
5 Years
There were a couple of new bonds added to the 5-year table, not initially challenging the top spot, but rather matching it. United Trust Bank was the first to make a move, launching a new bond paying 5.80% to match RCI. Principality Building Society was the next to join them but this bond was only available for a few days. Then United Trust Bank replaced it’s 5.80% bond with its latest issue paying 5.75% and Cynergy has once again swooped in to steal 1st place paying 5.81%.
All in all, pretty disappointing. But, even though the longer term bond rates are a little lower, don’t immediately dismiss the idea of locking some cash away for longer. If inflation does fall close to the 2% target in the near future, by locking in for three or perhaps even five years at the current rates of up to or close to 6%, you could end up in the enviable position of earning interest that is greater than inflation for at least part of the term of the account.
Things have been so busy in the fixed term bond world that it’s been difficult to summarise some of the other categories. But last time I promised I would let you know what’s been happening to fixed rate cash ISAs, as the Personal Savings Allowance is no longer fit for purpose for many people.
1 Year
Just six weeks ago, all of the top five 1-year cash ISAs were paying less than 5% and the average was 4.87% AER. Fast forward to this week and there have been some strong rate rises, so the average has increased to 5.71% with the top rate paying 5.75% with Paragon.
Compare this to the increase of the top five 1-year fixed rate bonds over the same period, the average of which has gone up from 5.74% to 6.03%, you can see that ISA rates are catching up quickly.
2 Year
It’s been an even stronger recovery in the 2-year table. The average of the top five 2-year ISAs six weeks ago was also 4.87% with the top rate paying 4.92% AER. As we head into the weekend though, the average of the top five ISAs is 5.73% and the top rate is 5.90% AER. What’s even more unusual is that the market leading ISAs are with high street banks, NatWest and Royal Bank of Scotland!
3 Year & 5 Year
Keeping with the theme of performance of the top rates over the last few weeks, 3-year and 5-year fixed rate ISAs have also forged ahead with a strong recovery, far faster than the equivalent fixed rate bonds. But as with the bond market, there’s not been as much activity in the longer term accounts, and the top rates are lower than the short-term ISAs. The top 3-year fixed rate ISA is now paying 5.60% while the top 5-year ISA is paying 5.26%
As my recent article illustrates, if you are one of the many that are now paying tax on their non ISA savings, it’s great to see that cash ISA rates can now really help shelter some of your interest from the taxman.
@savingschampion
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