The ISA season is normally well under way by this time of year, with banks and building societies battling to be at the top of the best buy tables.
But this year it’s a very different picture and concern for the hard pressed saver continues as the on-going spectre of the Funding for Lending Scheme (FLS) means that the usual appetite to raise new money from savers has all but disappeared.
This week Santander has launched its offering for the ISA season. As a key player, it’s encouraging to see a selection of competitive offerings hit the market; however the rates are still very uninspiring.
But other key players such as Barclays, HSBC, NatWest and Lloyds have not come up with the goods yet and seem content to watch others take the ISA crown this year.
Regardless of this small spate of activity, ISA rates are still far lower than this time last year. Easy access ISA rates are nearly 30% lower at 2.50% rather than in March 2012 when the best rates were 3.50%.
Fixed rates have fared equally badly. If you compare Santander’s two year fixed rate offering currently paying 2.80% to the same period last year, savers could get 4% - a 30% reduction. One year rates however are an unbelievable 40% lower; currently the best one year fixed rate ISA is paying just 2.10% - less than an easy access account - compared to 3.50% last year.
It seems hard to believe that you can earn better rates on easy access and notice ISAs than you can on a one year fixed rate ISA, but this is the case at the moment and therefore an indication of the expectation for rates to remain low for the time being.
However, as the Funding for Lending scheme has left savers floundering for decent returns, cash ISAs can be a really important tool – even for some non-taxpayers - to help them try to at least match inflation, especially as the rates on best buy ISAs are currently higher than the gross rates on most taxable savings accounts.