The battle to attract savers as the new Isa season gets under way is in danger of turning into "a damp squib" with only a limited selection of deals to choose from, experts have warned.
The savings market traditionally livens up with a flurry of activity around this time of year, when competition hots up between banks and building societies to reel in the rush of savers who have not yet used this year's tax-free Isa allowance or attract those who are looking for somewhere to put their money when the next financial year starts.
Financial information website Moneyfacts said this Isa season is already "a bit of a lame duck". It said that in January last year there were 91 cash Isa deals that were either completely new launches or new issues of fixed rates, but this month so far there have been 27.
The Isa season usually runs from December to May, but last month just 24 completely new or revamped cash Isa deals were launched, which is around a third of the 73 deals in December 2012.
Moneyfacts said a "limited choice means less competition on rates". The average Isa rate has dropped from 1.87% in January last year to 1.64% now. In January 2010, the average rate was nearly half a percentage point higher than it is now, at 2.05%.
Any interest earned on money saved this way is ring-fenced from the taxman, making Isas a lifeline for people struggling to get decent returns on their savings at a time when the Bank of England base rate has been held at a historic 0.5% low for nearly five years.
A key Government scheme to help borrowers called Funding for Lending had been blamed for making savers' plight worse. The scheme has given lenders access to cheap finance, which helped mortgage borrowers but also resulted in lenders becoming less reliant on having to attract savers' deposits.
Funding for Lending has been refocused towards boosting business lending this year and this move had offered a glimmer of hope to savers that this could result in providers starting to offer slightly better rates.
But Sylvia Waycot, editor of Moneyfacts.co.uk, said that unless the market picks up soon "sadly, we have the makings of a damp squib".
She said: "Isa season is the equivalent of Christmas for savers, with lots of competitive rates, fanfares and razzmatazz, but so far this year it is turning out to be a bit of a lame duck.
"As savings rates have been pretty dire of late, savers bank on Isa season to offer some respite from inflation and the taxman, but unless we have more products, choice will be limited.
"Savers are crying out for good rates and Isas should satisfy that need, but it looks as if the banks and building societies still don't need our money."
According to Moneyfacts' best buy tables, Britannia, part of the Co-operative Bank, offers a one-year fixed-rate cash Isa with a rate of 1.85%. The Post Office offers a one-year fixed deal with a rate of 1.8%.
Virgin Money and Skipton Building Society also sit at the top of Moneyfacts' tables, offering five-year fixed-rate cash Isas with a rate of 3%.