Update on cash Isa rates being offered 13th March 2013.

The annual, end of tax year, rise in the interest rates offered by banks to encourage savers to use up their annual tax free allowance is nowhere to be seen this year.

As we reported a few weeks ago in our article on the drop in Cash ISA rates, the Governments policy of offering a cheap source of funding to the banks has resulted in Cash ISA rates which are nearly 1/3 less than last year. The average rate for Cash ISA's on the market this year is 1.74%, compared to 2.55% this time last year.

The Government's Funding for Lending program, launched last August, provides banks with cheap funding to encourage lending to individuals. The banks now have a source of cheap finance so they are not enticing savers onto their saving schemes with attractive interest rates.

So is there any point in holding out for an extra few weeks in the hope of using up your savings allowance at a better interest rate? Well the expert opinion seems to be that little will change in Cash ISA rates by the end of the tax year. The Guardian report today that Michael Ossei, personal finance expert at comparison site uSwitch says: "Cash Isa rates have plummeted and savers are getting the lowest returns in years. We are nearing the end of February and only a handful of providers have announced increased rates."

Compairing the ISA rates on offer at the moment is not pleasant reading. There are no clear winners here. Most banks are offering similar, measly and below inflation, rates. According to The Guardian's review of rates today, Coventry Building Society's 60 day notice account is paying 2.8% including a 12-month bonus of 0.6%; Nationwide's four year fixed pays 2.7%; their one year fixed ISA pay's 2.05%. Both Cheshire Building Society and Chorley Building Society's ISA's are worth looking into also. Cheshire's accepts savings from an existing Cash ISA fund, not just new Cash ISA money. 

Savers wishing to use up their savings allowance of £5,640 before the 6th April are faced with a disappointing choice of Cash ISA options, a situation unlikely to change anytime soon.