Let the battle commence: Is this just the start of an cash ISA rate war?

The Momentum UK Team 05 April 2013

As we wave goodbye to yet another tax year now could be the time to reflect on just how different the so called ISA season has been this year; it’s certainly like nothing that we’ve ever experienced, since ISAs began back in 1999.

In the run up to the end of the tax year, providers are normally fighting amongst themselves to offer the best rates, but this year has seen a stark change. Providers have shown little to no interest in pulling in new cash ISA customers. However, there is a faint light at the end of the tunnel as we’ve seen a flurry of activity in the cash ISA market for the new tax year, which starts tomorrow.

It looks as though a bit of a rate war may be beginning among the building societies; great news for the beleaguered saver if it continues.

Coventry Building Society has today raised the rate on its 2013/14 easy access cash ISA from 2.50% to a market leading 2.60% tax free/AER. This has pipped Leeds Building Society which yesterday announced plans to launch a rate of 2.55% - which would have been market leading if it wasn’t for the Coventry. Will Leeds rise to this challenge and continue the battle?

We’ve also seen some best rate tussles in the non ISA easy access market but yet again it’s the building societies who are in the race.

A new entry into the best buy tables from the West Brom Building Society means that savers with balances of £10,000 can now earn over 2% once again. The Direct Bonus account is paying a top rate of 2.05% gross/AER on balances of £10,000 and above.

In response to this, Skipton Building Society increased the rate on its Online Bonus Saver Issue 3 to 2% - up from 1.80%. This increase was very unusually extended to existing savers as well as new savers, although the account itself hasn’t been around all that long.

It’s a sad state of affairs that we’re getting excited about rates that quite frankly are still very poor. But having seen only rate reductions over the last seven months, it’s great to see some providers bucking the trend at last. We’ll have to cross our fingers and hope it continues however we fear it will be a while yet before we get back to the highs of summer 2012 let alone before interest rates as whole began their downward spiral back in 2007.