Savers urged to grab top savings rates now as banks pull cash Isas

Martin Lewis viewer reveals huge increase in savings income

Market-leading savings rates are being repeatedly cut or axed altogether and providers are “closing down” their cash Isas just days into the new tax year.

This is bad news for savers, as fixed-rate bonds are already falling ahead of a sharp expected drop in inflation.

Millions now face a scramble to secure best buy deals before they fall even further in the months ahead.

Savers face a double squeeze, according to Anna Bowes, founder of savings rate tracking service Savings Champion. “Banks and building societies are pulling their top deals as they anticipate falling inflation and interest rates.”

There is a traditional rush to pump money into cash Isas at the end of each tax year, as savers and investor scramble to use their annual £20,000 allowance before it expires at midnight on April 5.

This period is known as the Isa season, and the frenzy spills over into the new tax year, when everybody gets a new £20,000 tax-free allowance.

Evidence suggests that savers and investors who use their allowance at the start of each tax year rather than waiting to the end get far better returns. 

Yet this year it won’t be easy as banks and building societies pull up the shutters. “It feels like the Isa season could already be coming to a close just one week into the new financial year,” Bowes says.

She added: “If you see a market leading rate grab it now, because it could soon be withdrawn, too. There’s no time to lose.”

April 6 saw a short-lived “spike” in fixed-rate cash Isas, but these were limited to short-term bonds running for just one or two years.

Banks are wary of paying more on long-term fixed-rate bonds, because they expect both inflation and interest rates to plummet.

The latest Bank of England report suggests UK inflation will fall to just one percent by 2025, then slide to 0.4 percent in 2026. 

If that’s correct, we will soon return to the era of ultra-low interest rates, with inflation just a bad memory.

Today’s best buy five-year fixed rate cash Isa, from UBL, now pays just four percent.

Usually, savers can expect a higher return when they lock their money away for a longer period, but that’s not the case today.

One-year bonds now pay more, with Shawbrook and Close Brothers paying 4.17 percent, Bowes says.

Two weeks ago savers got more elsewhere. “On April 6, Paragon and UBL launched one-year fixed rate Isas paying 4.20 percent but by the time Easter was over, these were gone.”

It’s a similar story over two years. “UBL launched a top rate of 4.30 percent but that was withdrawn at the beginning of this week,” Bowes says.

Paragon, Shawbrook and Close Brothers have launched new Isas paying 4.28 percent.

These were still available on Friday but there is no guarantee they will still be around next week, Bowes cautions.

Leeds Building Society offers a three year fixed-rate cash Isa paying a market-leading 4.20 percent.

Last week, Paragon and UBL launched market-leading three-year fixed rates offering 4.25 percent but these were pulled within days. “It was a case of blink and you missed them.”

Providers continue to offer better rates outside of the tax-free Isa wrapper, with Smart Save and Oxbury Bank’s one-year fixed-rate bonds paying 4.53 percent and 4.54 percent respectively.

The same two banks top the two-year tables too, both paying 4.58 percent.

Cynergy Bank and Close Brothers are in joint top place over three years paying 4.57 percent.

Over five years, Tandem and Monument lead the way with 4.60 percent, after United Trust Bank pulled its 4.65 percent rate.

Everywhere you look, savings rates are falling and this process looks set to accelerate as inflation falls.

The message is clear, Bowes says: “As savers cut rates and close down their cash Isas, get them while you can.”

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