What does the ISA market have to offer aspiring savers at present?
It is safe to say that the past few years have been a torrid time for the savers of the country, who have consistently been subjected to repeated contractions in the rates they are being offered by banks and building societies when pursuing the acquisition of an ISA.
Long heralded as the natural answer to declining rates on savings accounts, and an easy way to beat the taxman, ISAís have declined in value over the past few years, despite the introduction of the New Isa, or NISA, in July which raised the cash allowance of the accounts to £15,000 a year. And now it has been confirmed that interest rates have actually dropped by a as much as 55 basis points in the past two weeks leading many market analysts to issue a warning to savers to be proactive now and take measures to protect their investments.
The alarming reality is that even though there has been no change in the Bank of Englandís base rate of 0.5%, rates on both ISAís and cash saving products have slowly crept downwards to the brink of 0% in the last 12 months, making it difficult for investors to secure the liquidity required to ensure long-term financial stability and protection for their other financial endeavours.
Nevertheless, the reality is that the current landscape of the market is not set to change anytime soon, and as such aspiring savers need to make sure that they acquire the best possible ISA, which pays them the highest returns in order to maximise their fall-back cash in the event that their cost-living gets too high or any unfortunate events occur in their financial affairs. With rates declining every month, the importance of getting a competitive ISA offering for this year is paramount and acting fast now will ensure that you will probably get a higher paying product than if you did so next month, or the month after.
As previously mentioned, the existing ISA allowance now stands at £15,000, which can either be divided between stocks and shares and cash, or solely comprise of either. To compound the previous point, the most competitive variable rate ISA you would have been able to acquire at outset of September would have paid you a rate of 2.25%, this being Nationwideís Flexclusive offering. This has now dropped to 1.7% in the form of Market Haboroughís easy-access deal, with many other offers from the mainstream market falling under 1.5%.
Even the fixed rate market has taken a hit, with Aldermore remaining one of the few providers offering the same 2.25% rate, with their 3 year fixed rate cash ISA. Other banks such as UBL and Vanquis Bank High Yield have offered 3.2% and 3.21% respectively, though these competitive rates are only attainable for people who are prepared to take the risk of enjoying this same rate on a fixed-basis for five years. These rates will likely only stay at this value anyway for a short time because statistical analysis of the usually superior fixed-rate market has shown that is too is on the decline. At the start of September, you would have been able to obtain a rate of 3% on Leeds Building Society 5 Year No Access ISA, though this has now fallen to 2.85% on Newcastle Building Societyís five year deal.
The primary reasons forwarded for this decline in rates has been the Bank of Englandís Funding for Lending Scheme and a lack of real competition in the market, which has lowered the necessity on banks and building societies to offer consumers higher rates on their savings products. With rate rises on the horizon, savers should be careful to committing to any long-term deal because the reality is that rates will rise sooner rather than later. Whilst there is still a huge degree of contention over where the rate rise will instantly impact the savings landscape, it is nevertheless better to play it more cautiously and commit to one of the one year or two year deals, rather than fixing in for five.
And with statistical analysis seeming to concretely display that rates are tumbling fast, it would probably be best to take to comparing online now and finding the best deal this month, because the likelihood is that it wonít exist or reappear again for a considerable length of time hereafter.