Easy access cash ISA rates hit record low

lovemoney.com
British Pound Graph
British Pound Graph



The average interest rate on an easy access cash ISA has dropped to a new low of 1.17%, according to research from financial information website Moneyfacts.

The fall comes despite efforts from the Government to kickstart the market.

In the spring Budget the Chancellor announced an increased ISA limit, which launched in July.

Now with the new ISA, or NISA, savers can put away up to £15,000 in cash, stocks and shares, or any combination of the two.

It was hoped the changes would reignite the market and encourage providers to compete on rates.

But the Moneyfacts research shows the market remains subdued, with some rates actually falling since the new limit was introduced.

Compare savings and ISA rates

Lacklustre response

An average rate of 1.17% on easy access cash ISAs is the lowest Moneyfacts has recorded since its records began back in 2007.

Meanwhile the average notice ISA is at 1.30%, a marginal increase over August, but still one of the lowest rates seen in the last 12 months.

Fixed rate cash ISA rates have dropped since April, with the average one-year fixed ISA rate tumbling by 0.08% to 1.51% in the last five months.

The ISA shakeup has also failed to boost the number of cash ISA products on the market. There are currently 283 ISAs available, the lowest number in 12 months.

Compare savings and ISA rates

What's to blame?

Moneyfacts says the subdued market shows the Government's efforts to revive rates has been a 'flop' and we are still "paying the price" for the Funding for Lending Scheme (FLS).

This was designed to help kick-start lending by giving banks and building socities access to cheap finance on the condition they would pass on the benefit to borrowers.

However, the access to cheap funds meant banks and building societies were less motivated to attract savers' money to boost their reserves, leading to a fall in saving rates.

Despite FLS enduing in January 2014 rates still haven't returned to anywhere near where they were before it was introduced.

The table below shows the average rates on easy access, notice and one-year fixed rate ISAs before, during and after the scheme.

ISA

Apr-12

Aug-12
(FLS starts)

Apr-13

Jan-14
(FLS ends)

Apr-14

Jul-14
(£15K limit)

Sep-14

Easy access Cash ISAs

1.82%

1.76%

1.41%

1.25%

1.24%

1.20%

1.17%

Notice Cash ISAs

2.11%

2.13%

1.75%

1.49%

1.46%

1.28%

1.30%

One-Year Fixed Rate Cash ISAs

2.94%

2.80%

1.95%

1.62%

1.59%

1.49%

1.51%


Source: Moneyfacts

Compare savings and ISA rates

The best cash ISAs

If you are looking for the best tax-free home for your savings here are the top rates across the main types of cash ISAs.

Account

Type of ISA

Interest rate

Minimum deposit

Notes

Newcastle BS Fixed Rate ISA

Five-year fixed rate

2.85%

£1

Transfers and new subscriptions.

Coventry BS Fixed Rate ISA

Four-year fixed rate (until 31st May 2018)

2.75%

£1

New subscriptions only.

Yorkshire Bank Fixed Rate Cash ISA

Three-year fixed rate (until 31st October 2017)

2.45%

£2,000

Transfers and new subscriptions.

Clydesdale Bank Fixed Rate Cash ISA

Three-year fixed rate (until 31st October 2017)

2.45%

£2,000

Transfers and new subscriptions.

Barclays Flexible Cash ISA

Two-year fixed rate

2.02%

£1

Transfers and new subscriptions.
Three free withdrawals permitted during term.

Coventry BS Branch Instant ISA

Easy access

2%

£1

New subscriptions only.
Only available in branch.

Islamic Bank of Britain Sharia Compliant Notice Cash ISA

Notice

1.80%

£250

Transfers and new subscriptions.
120 days' notice required for withdrawals.

Post Office Fixed Rate Cash ISA

One-year fixed rate

1.70%

£500

Transfers and new subscriptions.

Post Office Premier Cash ISA

Easy access

1.55%

£100

Transfers and new subscriptions.
Rate includes 0.8% bonus for first 12 months.

BM Savings Extra ISA 11

Easy access

1.55%

£1

Transfers and new subscriptions.
Rate includes 1.05% bonus for first 12 months.


To keep up to date on the Cash ISA interest rates bookmark The best Cash ISAs.

And for a wider view of the best rates available for cash savings generally, including current accounts and peer-to-peer accounts, take a look at Where to earn the most interest on your cash.

Compare savings and ISA rates

Ed Balls Refuses to Say What the
Ed Balls Refuses to Say What the


Related articles:

How NISAs can beat pensions at their own game

New ISAs allow for more tax-free saving

How tax can teahc us about saving