Savers are pouring money into cash Isas as they look to protect the interest on their nest eggs from tax.
They put more than £11 billion into cash Isas in April to take advantage of their £20,000 allowance, which reset at the start of the new tax year on April 6. This was up an impressive 31 per cent on the same month last year.
Providers are vying for their share of savers’ cash by leapfrogging each other to get their deals to the top of the best-buy tables.
They know that one of the top ways to get savers’ attention is by offering the most impressive rates.
I have seen some banks raise their rates two or three times this month. The top rate is currently 4.89 per cent from Shawbrook Bank, but is unlikely to be for long as providers continue to try to outshine each other.
Tax shelter: Savers put more than £11bn into cash Isas in April to take advantage of their £20,000 allowance, which reset at the start of the new tax year on April 6
The leapfrogging will not make a great deal of difference to the interest you earn — in most cases rates are going up by 0.01 or 0.02 percentage points, which adds only £4 interest at best even on the full £20,000 Isa allowance.
But the competition means at least rates are holding up for the time being.
Insiders also tell me that providers are looking to attract savers with fixed-rate cash Isas taken out in previous years that are now coming to the end of their term.
Deposits in such accounts are often substantial and so of great interest to them.
Those who have put in the full amount each year since Isas were first introduced will have put in just short of £250,000.
Check the best cash Isa rates in our savings tables
The good news for savers with one-year fixed-rate Isas — the most popular term — coming up for renewal, is that rates are slightly higher than 12 months ago. The top rate then was 4.75 per cent from Virgin Money.
Rates are holding up even though we have heard for months predictions of the Bank of England base rate going down.
In fact, the average one-year Isa stands at 4.4 per cent — a year ago it stood at 3.96 per cent, says data scrutineers MoneyfactsCompare.
Financial markets have been forecasting that the Bank of England will start to cut its base rate from 5.25 per cent for months, but disappointing inflation results have meant there has yet to be a movement down.
The Bank of England could cut the rate tomorrow at the Monetary Policy Committee meeting but the general consensus is we will not see a cut until at least August.
Another plus is your interest is automatically tax-free in an Isa and beats the current inflation rate running at 2.3 per cent in the 12 months to April.
We find out the May figure today.
Easy-access accounts hit by rate cuts
Watch out. Banks and building societies are lowering rates on their easy-access accounts.
It is a reminder that we need to keep checking them, even before there is a cut in the Bank of England base rate from 5.25 per cent.
Last week, Marcus announced cuts in its Online Savings and Cash Isa rates, lowering them from 4.75 per cent to 4.55 per cent.
Chip soon followed suit on its Instant Access account with the rate down at 4.81 per cent from 5.01 pc.
Kent Reliance has also slashed its rate from 4.96 per cent to 4.85 per cent, while Charter Savings Bank has made a huge reduction from 4.93 per cent to 4.6 per cent.
Charter lowered the rate on its easy-access cash Isa to 4.5 per cent from 4.97 per cent.
Meanwhile, Virgin Money has announced that from the start of August, money in its M Plus Current Account will earn just 1 per cent. The rate is to be more than halved from its current 2.02 per cent.
sy.morris@dailymail.com