With just under six months left before cash ISA limits are cut, providers are battling to offer new customers the highest rate and lure in savers while interest rates are high.
For months, there have been four firms challenging for top spot with the best rate on any given day but such is the ferocity of competition that several have made changes multiple times over the past week alone.
Interest rates change when the Bank of England base rate is shifted by governor Andrew Bailey and his colleagues on the Monetary Policy Committee. This changes the cost of borrowing for banks and building societies, which they pass on to customers.
There is also a competitive element, where one firm raising the rate offered can prompt others to, but rates generally stay closely tied to the base rate.
Firms often make short term changes to deals that diverge from the base rate just to get customers in the door. These do not usually last long, as offering a higher rate than the base rate will cost them money rather than make a profit.
Best cash ISA rates
According to Moneyfacts, the best rate available for cash ISAs on 7 October is with Trading 212, with its 4.75 per cent interest rate available when using a partner code to sign up.
When deciding which ISA provider to use, it’s important to consider more than just the headline rate – as bonus rates, withdrawal allowances and whether or not it is a flexible ISA all important factors to match to your needs.
The others close behind in rate terms include:
Chip, the savings app, is offering 4.72 per cent to new customers via its variable tracker, for 12 months. Then the standard rate of 3.5 per cent applies. Transferring out will mean you forfeit any unpaid interest.
Moneybox offers 4.71 per cent to new customers, which includes a 1.26 per cent bonus rate for the first 12 months only. After this the rate would drop to 3.45 per cent.
Plum has a rate of 4.68 per cent available to new customers which includes a bonus of 2.14 per cent if kept for 12 consecutive months and other conditions are met. After 12 months, the rate would be 2.54 per cent.
All the rates mentioned can be changed at any time, particularly if the Bank of England base rate changes.
NS&I forced to follow top rates
For years, British savers have used NS&I, the group which runs Premium Bonds as well as more traditional savings accounts, as a safe haven for their money, knowing their cash is backed by HM Treasury.
But this year, as interest rates stayed high and savers changed their habits, they were for a long time way off the pace for top rates.
Savers purely chasing the best rates are unlikely to go with NS&I, as the rate available on its easy access product is only 3.8 per cent.
There are fixed term offerings at 5 per cent and above, but these mean locking your money up for between one and five years. NS&I has upped the rates on these four times over the past four months.
NS&I’s one-year growth option offers 4.99 per cent, and the income option is 4.88 per cent gross and 4.99 per cent AER.
The two-year growth option offers 5.07 per cent, and the income option is 4.96 per cent gross and 5.07 per cent AER.
Its three-year growth option offers 5.10 per cent, and the income option is 4.99 per cent gross and 5.10 per cent AER.
The NS&I five-year growth option offers 5.17 per cent, and the income option is 5.06 per cent gross and 5.17 per cent AER.
Sarah Coles, head of personal finance at AJ Bell, said: “NS&I is stepping up its game to compete in a tough market. It’s boosting the rates on its fixed rate bonds for the fourth time in less than four months.
“They’re pretty substantial hikes too, which put them within shouting distance of the best on the market. It’s a sign of just how hard the organisation is having to work to attract cash.
“The fact NS&I’s rates have been hiked yet again owes much to the fact that the market is so competitive right now, Ms Coles contineud. “In August, NS&I revealed that in the first three months of its financial year it had raised just £1 billion of its £15 billion target, so it needs to knuckle down to secure some serious fundraising.
“It’s going to hope that this latest round of hikes will be enough to move the dial.“NS&I has a duty to balance the needs of savers with those of taxpayers, so they are careful not to over-pay. However, they are pushing harder than they usually do.”
“The three-year rate is now among the top 10 most competitive in the market, while the fixed rates for other periods are in the top 20.
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