Cash Isa deposits increase by 50%

Updated: 
Union Jack piggy bankFrustration over low savings rates fuelled a 50% surge in deposits into cash Isas last month as savers looked for better returns.

Monthly figures from the British Bankers' Association (BBA) showed £7.5 billion was placed into accounts at the peak of the Isa season.

Low interest rates and high inflation have made the tax advantage of Isas more attractive, although there is a limit of £5,640 each year. Comparison website Moneyfacts recently said more than 120 Isas beat inflation, compared with just over 30 non-Isa accounts, all of which are fixed rate bonds.

Moneyfacts spokeswoman Rachel Springall said that as well as the tax-free status of Isas being a big pull for customers, competition among banks to attract savers has been particularly strong this year, with savers needing to rush to snap up the best deals.

She said: "Isa season has been prominent, with some of the best buys lasting for only two or three weeks at most.

"There has been quite a lot of competition and these deals will have been at the forefront of people's minds. They are starting to be withdrawn and replaced with lower rates."

The Isa boost helped personal deposits to rise by 3.9%, with £666.4 billion held in personal deposits and savings, said the BBA.

But while people have been bolstering their savings, demand from consumers for loans and overdrafts remains weak amid economic uncertainty, and unsecured borrowing repayments, including credit cards, personal loans and overdrafts, continue to outweigh new lending, the report said.

BBA statistics director David Dooks said: "The new tax year saw savers moving money into Isas from other accounts. Isa inflows of £7.5 billion in April were around 50% higher than those a year earlier.

"Weak UK growth and eurozone uncertainty continue to undermine business confidence, leading to continued sluggish demand for borrowing."

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