Caitlyn Eastell, Personal Finance Analyst at Moneyfacts, said:

“Savers now have more choice than ever before as the number of products and providers reach record-highs. Lesser-known banks help the market grow and can be a source of innovation as they typically need to compete harder for savers’ hard-earned cash. However, many average rates continue to fall across the board. Variable ISAs and non-ISAs are now at their lowest levels in almost three years, while most fixed rates are at their lowest in almost three years, except for long-term non-ISAs which are at their lowest in four. It would not be surprising if the fading rate environment leaves savers disheartened, but it’s vital that they do not give in to apathy as they can still get over 4% on the most competitive accounts.

“ISA season is quickly approaching, and many providers will be competing fiercely to make their deals more enticing to new customers. The average bonus on a cash ISA has risen to its highest level in 16 years, active switchers reap the most rewards but it’s crucial to review the rate once it expires to avoid missing out in real terms. Tax-free accounts remain a popular and necessary option for many savers to avoid any unpleasant surprises in the form of a tax bill. Income tax bands are frozen until 2031, which could pull millions of consumers into the higher-rate bracket where their Personal Savings Allowance is halved to £500. With the Moneyfacts Average Savings Rate now at 3.31%, basic rate taxpayers can hold around £30,200 in a non-ISA account at this rate before paying tax on the interest, while higher-rate taxpayers can hold £15,100.”