For years I have recommended you stay away from savings accounts offered by the big High Street banks.
They typically pay a pittance because savers often keep their nest egg with their current account provider, so they don’t need to offer great rates to entice us.
The exceptions are their regular saver accounts, although these limit how much you can save each month.
But things have changed since the start of the tax year on April 6. In a surprise move I’ve not seen for years, the big banks are competing fiercely for a slice of our new cash Isa allowance of up to £20,000.
In February, when the Bank of England base rate stood at 4.75 per cent, one-year fixed rate Isas from the likes of Halifax and Lloyds paid 3.95 per cent and Santander an even lower 3.6 per cent. Their competitors were then offering as much as 4.5 per cent.
Now, despite the cut in the base rate to 4.5 per cent, the banks have upped their rates to 4.25 per cent.
Better rates: Big banks are now competing fiercely for a slice of our new cash Isa allowance of up to £20,000
Check the best cash Isa rates in our savings tables
Halifax, Lloyds, Santander, Bank of Scotland and Nationwide all offer this rate.
The minimum deposit is also lower than the £1,000 or £5,000 you usually need to open an account. They are asking for £500, or in the case of Bank of Scotland and Nationwide it’s just £1.
Only NatWest is letting the side down on the rate front with a lowly 3.75 per cent. Barclays pays a lower 4.1 per cent too – minimum amount £1 – but its account comes with a difference which could suit some.
It allows you to make withdrawals three times a year, as long as you don’t take out more than 10 per cent of your money each time.
Some online providers including Aldermore, Vida Savings and Zopa have pitched their one-year Isas at 4.25 per cent too.
The very top rate among one-year fixed-rate Isas comes from the online Charter Savings Bank on a minimum £5,000 and Tipton Building Society at 4.27 per cent.
If you want to fix for two years you can get 4.1 per cent from Nationwide and Santander. Online banks Aldermore and Charter Savings Bank pay a slightly higher 4.2 per cent.
This time last year, the Government changed the rules to say you could open as many cash Isas as you like, so you can mix and match fixed-rate and easy-access accounts.
But 12 months on the big banks still don’t let you do this, saying you can only open one cash Isa with them in any tax year. It means you will have to go elsewhere if you want to open a second Isa.
