Halifax has more than doubled the rate on its five-year fixed rate cash Isa, just in time for the end of tax year rush.
It is the only best buy rate from a high street bank in This is Money’s independent best buy cash Isa savings tables as they continue to show little interest in savers cash.
The new account pays 2.25 per cent, the best Isa rate currently available to savers wanting to make the most of their £20,000 allowance before the 5 April deadline – but you have to leave your money for five years to get it.
Best buy: Yes, you have to fix for five years with the Halifax best buy Isa – but it is a good sign that banks are dipping their toe into the water once more
Halifax’s 2.25 per cent rate shoots straight to the top of the best buys alongside Charter Savings Bank.
However, Halifax has a smaller minimum deposit requirement at £500 to open the account. It could be the catalyst for big banks to finally get involved in tax-free deals once more.
In recent years, the best buy tables have been dominated by small challengers. Big banks have largely shunned cash from savers, with some offering rock bottom rates as low as 0.1 per cent.
In fact, some of the worst rates on the market reportedly return as little as 38p on a £1,000 Isa pot over the course of a year.
While the rate from Halifax may not beat inflation, it’s good news for savers if the big banks begin to compete again, and it could be a turn in the tide for rates.
Anna Bowes, director of independent savings advice website Savings Champion, says: ‘It’s great to see another well known name enter the cash Isa best buy tables and this was a really spectacular move by Halifax, to more than double the rate they were offering on their previous issue.
‘Isa rates have been increasing over the last few months and the competition this Isa season is much greater than we’ve seen over the last few years.
‘With only a few days left of the current tax year, it’ll be interesting to see if any more big names show their hand.
‘Savers should remember that as long as their chosen provider is part of the UK Financial Service Compensation Scheme, or European equivalent, there is no reason not to choose a lesser known name.
‘More challenger banks are entering the cash Isa market place, and this added competition is pushing rates in the right direction.
‘Savers may need to take the plunge and opt for an unfamiliar name if they are to secure the best rates.’
While not one of the ‘Big Five’ Nationwide Building Society also launched a competitive new rate this Isa season.
It pays a top rate of 1.4 per cent on its Single Access Loyalty Isa Saver, but the rate is reserved for existing customers of more than a year and it only allows one withdrawal a year.
The rate for new customers is 1.3 per cent.
Table-topping rate: Halifax has launched a new 2.25 per cent five-year fixed rate Isa
The finer details of the Halifax five year Isa
If you prefer a regular income savers can opt for monthly interest from the bank instead at a slightly lower rate of 2.23 per cent.
It allows transfer in from other accounts within the first 60 days after opening.
If you want to withdraw your money before the five-year term is up, you must close the account and pay a penalty of 365 days interest.
Savers can open and manage their cash Isa in branch, over the phone, online and via the bank’s mobile app.
But is it worth fixing for such a long time?
Many savers won’t want to commit their cash for five years in case interest rates do rise.
Anna explains: ‘With the possibility of at least one Bank of England base rate rise on the horizon, many savers may question the sense in opening a fixed rate Isa – when they could expect the rate on their variable rate Isa to increase shortly.
‘But it could make sense to put some of your savings into a fixed-rate bond or Isa – perhaps just not all of it.
‘While you wait for your variable rate account to increase, you are missing out on better interest immediately and there is no guarantee or schedule for the base rate to rise.
‘It may happen in the short term, but equally, it may be delayed.
‘Plus there is no guarantee that your variable rate Isa will increase in line with the base rate.
‘A good approach to consider would be to look at it in a balanced way – keeping some of your money in variable rates to take advantage of improvements as and when they happen, but also to consider some of the top rates on the market at the moment, so you can maximise your interest while you are waiting.’