Savers rushed to take advantage of the new ISA regulations in July, investing almost £5 billion into tax-free accounts.
Figures from the British Bankers’ Association (BBA) show that ISA deposits increased by £4.9 billion in July, marking a significant improvement to what has been a rather destitute landscape.
Personal deposit levels increased by 3.5% on the previous year, while July deposits alone made up more than half the amount recorded during the first half of the year.
The rise was triggered by the introduction of new ISAs or NISAs in July, following changes announced in the 2014 Budget.
Under the new rules, savers received an increase in the annual tax-free allowance to £15,000, along with greater flexibility that allows them to save them in any combination of cash or stocks.
Previously, savers were only allowed to save up to half of the smaller £11,520 limit in cash, despite it being the favoured option by the majority of savers.
The BBA’s chief economist, Richard Woolhouse, suggested that people had been biding their time until the new rules came into place.
"Savings were a little low during the first half of 2014, but it seems people were just waiting until the new rules came into effect to invest their money,” he said.
“It's really encouraging to see evidence of savers taking advantage of the new cash ISA regime in the latest figures,” he added.
However, he said that more needs to be done to improve the household savings ratio, which is still only half that of the previous generation.
Banks Cutting Rates
But banks are still not making it easy for savers, with cut after cut to ISA rates being announced.
HSBC has become the latest to take the axe to its easy-access ISA rates. The bank will cut e-ISA rates to 1% in October, from as high as 1.7% on balances above £15,000.
The bank follows Barclays, the RBS Group, Halifax and Santander in announcing cuts to its ISA rates as the summer draws to a close.