Savings rates have tumbled in recent months and experts have expressed concern about whether the industry will this year enter a full-blown Isa season – when providers battle to offer the best rates on tax-free accounts ahead of the end of the tax year.
Experts have blamed the Government’s Funding for Lending Scheme (FLS) which allows providers to access cheap cash from the Treasury in return for lending to businesses and residential customers. This means that banks have little appetite for coaxing investors in with cheap rates as they can get cheaper cash from the scheme.
Typically, Isa rates are better in March and April than at other times of the year. Last year, the best instant access rate was 3.5pc from the AA or Halifax was offering 4.5pc if you tied up your money for five years.
However, the Halifax rate increases comes hot on the tails of the previous best buy from Virgin Money launched earlier this month.
Paying 2.35pc, the bank’s Five-Year Fixed-Rate Cash Isa Issue 35 is available for those with a minimum deposit of £1 and is available in Virgin Money stores, online and by post and accepts transfers in of previous cash Isa balances, as well as new subscriptions.
Savers have until April 5 to deposit £5, 640 into a cash Isa. Unlike conventional savings accounts, interest is paid gross, without 20pc tax being deducted.
Charlotte Richardson
IAMRadioU
Brandon Walker