The traditional end-of-tax-year scramble for cash Isa customers intensified today as Santander announced it was raising the rates on a number of its products from Friday.
It is increasing the interest payable on its Loyalty Flexible Isa Issue 1 to 3.5 per cent for both new and existing customers. The rate on its Flexible Isa Issue 3 is also being raised - to 3.3 per cent.
These rates currently rank first and third in the market in the easy access category, though savers should be aware that the attractive terms (3 per cent plus base rate and 2.8 per cent plus base rate respectively) last only for 12 months. In addition savers wishing to sign up for the Loyalty Isa must have a current account, mortgage or investment with Santander. A further difficulty is that neither of these two Isas permits transfers in.
Defaqto, the financial research company, says that for savers seeking a new home for existing Isa cash, the best rates are paid by Nationwide, with 3.1 per cent on its e-Isa, and Halifax, with 3 per cent on its Isa Direct Reward. However, the Nationwide Isa is only available if you open a Nationwide card account.
David Black, of Defaqto, said: “March and April are the peak season for Isas as savers rush to use their annual allowance at the end of one tax year and for the beginning of the next. The vast majority of Isa inflows will occur over these two months so offering the best deals will attract a substantial amount of retail funds - hence the raft of attractive cash Isa launches.”
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He added: “There are some very attractive cash Isa deals about so it is well worth shopping around for the best deals. Essentially the choice is between the certainty of a fixed rate or the flexibility of a variable rate, if you either need access to your money or think that the base rate is going to go up.”
All commentators also point out that although interest rates are currently at a historical low, it’s still worth using the Isa allowance because you will be able to build a substantial lump sum tax-free and you will be in a position to enjoy higher interest rates on your money in future years.