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This week’s best ISA rates as two years pass with no inflation-beating savings deals

Nick Cheek
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Nick Cheek

Despite the Consumer Prices Index (CPI) falling to 8.7%, it’s now been a full two years since any savings have outpaced the rate of inflation. However, for savers looking to take out an ISA, providers are, at least, upping their rates as fixed deals now reach 4.50%.

The rate of inflation has fallen to single figures for the first time in eight months, yet, according to financial data service Moneyfactscompare.co.uk, it’s been a full 24 months since any savings accounts got anywhere near matching the CPI figure.

However, that should not put savers off from comparing and switching as there have been some notable improvements to the top rate deals in the market over the past month.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “There have been a few areas within the savings market to see positive uplifts, which may please consumers who want flexibility with their cash or those who are only prepared to lock their money away over the shorter term. Easy access accounts, notice accounts and one-year fixed bonds have improved, thanks to a combination of the Bank of England base rate rises and provider competition.

“Those savers comparing their existing accounts may be wise to switch, as they could earn more interest in the process. A similar picture can be seen across ISAs, which is good news for those who have not yet taken advantage of their ISA allowance.”

With that in mind, YourMoney.com explores this week’s best buy ISAs from easy access to five-year fixed rate deals.

Easy access ISAs

Recently YourMoney.com reported that NS&I had upped its easy access ISA rate to 2.40% and while any increase is welcome, the rate is still a long way from the current best buy ISAs on the market.

Yorkshire Building Society (YBS) has two ‘easy access’ ISAs offering 3.60% AER – its Limited Access ISA, and its online counterpart, the Limited Access Saver e-ISA. Both accounts can be opened with a minimum of £1, and both pay interest yearly.

However, while this product slots into the ‘easy access’ category, savers need to consider the accounts carefully as they are only able to withdraw on one day per year.

Meanwhile, three providers are offering 3.55%.

The first is Shariah-compliant Gatehouse Bank, which pays an expected profit (equivalent to interest rate) either monthly or annually. It can be opened and operated online only.

Next up is Chorley BS. The easy access account can be opened in branch, online or via post and requires a minimum £1 deposit. However, like YBS, access is limited. Savers can only take three withdrawals a year and if this is exceeded, the rate drops to 1.60%.

The third on the list is Leeds BS’s online-only easy access ISA. The account requires a minimum deposit of £1,000 but, Moneyfactscompare.co.uk noted “it works slightly differently to a traditional easy access account. This is because it has a term until July next year before it reverts to another rate of interest. As a result, interest is only paid on maturity.”

Fixed rate cash ISAs

One- and two-year fixed rate ISAs both offered 4.50% AER this morning, but they’ve slipped back this afternoon. The two-year top deal pays more than its long-term peers. In April, YourMoney.com took a deep dive into the reasons behind the discrepancy between rates.

One-year fix

Paragon’s 1 Year Fixed Rate Cash ISA pays 4.40% on a minimum £500. It can be opened online but operated online and by post.

Withdrawals are allowed but they’re subject to 90 days’ loss of interest. Interest is paid annually or monthly.

Two-year fixed

The best two-year fixed rate ISA comes from NatWest, whose Fixed Rate ISA – 2 Year Issue 323 pays 4.50%. It requires a minimum £1,000 and can be opened online, in branch, phone and app.

Three and five-year fixed

The top three-year deal comes from Virgin Money and pays 4.41%, although it should be noted this is lower than the best two-year fixed deal on the market. It is paid monthly or yearly and requires a minimum balance of £1. This can be added to for 30 days from account opening while withdrawals are permitted on a 120-day loss of interest penalty.

As for five-year fixed rates, Gatehouse Bank continues to lead the way with its Woodland Cash ISA range. This Shariah compliant bank pays an expected profit rate of 4.20% on its Fixed Term Woodland Cash ISAs and promises to plant a tree in a UK woodland for each one of these accounts that are opened and funded. However, green credentials aside, the account itself has a lower rate than all other best buy fixed one- to three-year fixed rate products.

Notice ISA accounts

Aldermore offers the best rate for accounts that need 30 days or less notice, paying 3.20% AER. In order to open this flexible ISA, you will need a minimum deposit of £1,000. Meanwhile, to withdraw funds from the account, you are required to provide 30 days’ notice, otherwise you will be landed with a 30-day loss of interest penalty.

Skipton BS is a new entrant in the notice market and tops the table for accounts that require a notice period of 60 days or less. Its 60-day Notice Cash ISA pays 3.65% AER. Minimum deposit is £1 and interest is paid on anniversary.