The average one-year fixed rate ISA was 4.12 per cent this month, its biggest month-on-month rise since October 2023, according to data from Moneyfacts.
Reeves confirmed in her Spring Statement last month that changes to the ISA were under consideration, with some suggestions that she will cut the existing allowance of £20,000 to as little as £4,000 in a bid to get more people to put their money in investments instead.
Future reforms, the statement said, would aim to “get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission.”
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Charlene Young, senior pensions and savings expert, said: “Inflation fell for the second month running in March, and whilst April brought with it a barrage of price increases, a rate cut announcement is looking very likely when we next hear from the Bank of England rate-setters on 8 May.”
Andrew Hagger, finance expert, said: “There’s always plenty of competition between ISA providers in the few weeks before and after the tax year changeover, which tends to drive higher rates.
“Economists are predicting up to 3 base rate cuts this year commencing on 8 May, so fixed rates will drift lower, so if you have some cash to lock away, do it sooner rather than later.”
On Tuesday, the IMF became the latest financial organisation to downgrade the UK economy, predicting Britain’s GDP would grow by 1.1 per cent in 2025, according to the fund, which was down from a rate of 1.6 per cent forecast in January.
Academic Stephen Barber previously told The i Paper: “To reform the cash ISA right now is highly questionable given the implication that otherwise risk-averse savers should be investing in a stock market set into freefall by the same Trump kamikaze economic policies that have wrecked the Chancellor’s careful budgeting.”
Savers rushed to put their money in ISAs this year in order to make the most of the benefits whilst they can, with financial services firm Hargreaves Lansdown reporting that, in the run to the tax year end, it saw 84 per cent more money paid into cash ISAs than in April 2024.
However, experts are encouraging savers to lock in rates now, as they are expected to fall in the coming months, with interest rates likely to come down from their current level of 4.5 per cent.
“However, cash ISAs have been known to drop after the end of tax-year deposit rush fizzles out, so savers should make it best practice to leave plenty of time to acquire a new deal and take full advantage of their yearly ISA allowance.”
“Given that markets now expect three rate cuts for the remainder of the year, fixed-rate deals around 4.5 per cent may not be around for much longer.“If you have cash that you don’t need for a period, it makes sense to consider a fixed rate account now while rates are still so competitive.”
Ms Young said: “Savers looking to make the most of their allowance should always shop around for the best deal, and some might consider locking their money in a fixed rate account now ahead of any announcement if they find a deal to suit them.
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