Average easy-access Isa rate 'falls below 1% for first time on record'

The average easy access Isa rate has fallen below 1% for the first time on record, spelling further misery for savers, according to a website.

The typical easy-access Isa rate on offer pays just 0.98% according to Moneyfacts.co.uk.

Moneyfacts said at the start of May, the average rate was 1.03%, down from 1.05% in April when the new tax year started - a time of year when Isa providers have traditionally been looking to attract new customers by offering decent rates.

By the end of May, the average easy-access Isa rate had dipped below 1% according to Moneyfacts, whose records go back over two decades. Moneyfacts said it marked the first time in its records that the average easy access Isa rate has fallen below 1%.

The savings market generally has been "under siege" from rate cuts, which have been outweighing increases for the last eight months, the website said.

For every rate increase taking place across the savings market, around nine rates are being reduced, Moneyfacts.co.uk found.

In May, Moneyfacts recorded just 18 savings rate increases - while over the same period 156 savings rate decreases were made.

Charlotte Nelson, a finance expert at Moneyfacts, said rate cuts made to Help to Buy Isas have been a particularly "disheartening" aspect of the cuts taking place across the savings market generally.

Launched in December 2015, Help to Buy Isas have been described as a ''no-brainer'' by experts, as they give people saving for a deposit for their first home a Government bonus of up to £3,000.

In May, Halifax cut the interest rate on offer to new customers from 4% to 2.5% after seeing "unprecedented demand" for the accounts. Santander made a similar cut to the rate on its deal, reducing the rate on offer from 4% to 2%, or 2.5% for 123 World or Santander Select customers. 

The continued slide in savings rates generally is a further blow to savers who have seen their returns hammered by low interest rates in recent years, despite the gains they can expect to make from a new personal savings allowance. 

The new allowance was launched on April 6, taking most savers out of paying any tax on any interest they earn from their cash pots. The allowance  means basic rate taxpayers can earn up to £1,000 in savings interest tax-free, while higher rate taxpayers can earn up to £500.

Money held in tax-free Isas does not count towards the allowance, as this cash is already ring-fenced from the taxman.

Ms Nelson said: "Only one rate increase is currently being recorded for every nine cuts, so savers would be right to expect this trend of sliding rates to continue."

She continued: "There's no denying that savers are facing hard times, however, this does not mean that they should be content to let their money languish in poor paying accounts.

"There are good deals out there, but savers will need to keep a close eye on the best buy tables to find a deal that will bolster their returns in a market that is very much under siege."

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