No doubt customers will have flocked to grab First Direct's rates of 1.85 per cent for those with £20,000 to £39,999 to stash away in an ISA. Even those with £10,000 to £19,999 got a 1.7 per cent rate, £5,000 to £9,999 got you 1.5 per cent and those with balances between £1 and £4,999 receive 1.3 per cent.
But less than three weeks after the gold-rush to invest tax free savings, First Direct announced it will be substantially decreasing the rates it had used to entice customers to invest with them in the first place.
The changes will take effect from October 16 and the HSBC-owned bank has written to customers announcing "good news that balances under £5,000" will be held at 1.30%. However, those with more than £40,000, who enjoy a 2.0% rate at the moment, will only get 1.5% from October. Any saver with £15,000 to £30,000 will now get just 1.4% (a drop of 0.3%-0.45%).
The problem for those that invested the full subscription (of £15,000) inside this tax year will not be able to reinvest the money in another ISA until the following tax year. The correspondence claims the rates are still competitive and that the tier structure has now been simplified.
The new rates have made a bit of a mockery to the new £15,000 Isa limit which came into effect on 1 July. But new customers looking to invest now are still seeing current higher rates being shown on its website online without any mention
of the future drops.
First Direct often tops the polls in customer service, so the current misdirection on ISA rates has surprised and alarmed