Britons are rushing to secure high interest ISA products before any looming changes to the existing £20,000 allowance new research has determined.
Hargreaves Lansdown reports that the firm saw 84 per cent more money paid into cash ISAs this month compared to April 2024 as the British public "lock in deals" ahead of rumoured reform from Chancellor Rachel Reeves.
Last month, the Government confirmed its is planning to reform the structure of tax-free savings account to "get the balance right" between cash and equities.
Savers have received a welcome boost as longer-term fixed rate bonds and ISAs have breached the four per cent mark for the first time in over six months, according to new data from Moneyfacts.
Savers are taking action before any reform to ISAs later in the year
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The average longer-term fixed bond rate has risen to 4.02 per cent, while the average longer-term fixed ISA has increased to 4.01 per cent.
Product choice in the savings market has also jumped , with a record 2,191 savings deals now available, including ISAs, marking the highest count since Moneyfacts began tracking the data in February 2007.
Cash ISAs have seen particularly strong growth, with the number of deals reaching a new record high of 611. The number of savings providers has also increased to 151, up from 150 last month.
While fixed rates have been climbing, easy access accounts have seen a contrasting trend, with rates falling to their lowest levels since mid-2023.The average easy access rate dropped to 2.76 per cent, representing the lowest level since July 2023.
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The gap between these rates remains significant, with the average notice rate paying 1.04 per cent more than the average easy access rate. Easy access ISA rates bucked the trend slightly, rising marginally to 3.03 per cent.
Rachel Springall, Finance Expert at Moneyfacts, commented on the trends.
She said: "Savers who are debating whether to lock into a fixed rate bond or ISA over the longer-term may find it encouraging to see average returns have breached four per cent for the first time in over six months."
She noted that the incentive to fix for longer is improving, as the rate gap between one-year and longer-term fixed bonds has narrowed to its lowest margin since July 2023.
"The last time the one-year average rate was below the longer-term average rate was back in June 2023, suggesting that the inversion in rates that we have seen could soon come to an end," she added.
Cash ISAs continue to be popular among savers, with £3.5billion deposited in February alone according to Bank of England figures.
This popularity comes as an estimated 2.5 million consumers are expected to pay higher-rate tax at 40 per cent this tax year, according to the Office for Budget Responsibility (OBR).
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The Bank of England has made multiple changes to the base rate over the years CHAT GPT Springall highlighted that cash ISAs have been thriving in terms of choice, reaching record high numbers.
However, she cautioned that "cash ISAs have been known to drop after the end of tax-year deposit rush fizzles out."
She advised savers to "make it best practice to leave plenty of time to acquire a new deal and take full advantage of their yearly ISA allowance".
"Easy access accounts remain a firm favourite among savers due to their flexibility, but they have been bashed and battered by rate cuts," Springall warned. She emphasised that savers must "shake indecisiveness and shop around for a better deal."
