Interactive Investor

Cash ISA rates hit record lows

24th March 2021 15:09

Marc Shoffman from interactive investor

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The deals have never been more popular, but never paid less.

Interest paid on cash ISAs has hit record lows, despite savers putting more cash away.

Many of us have saved more during the pandemic, due to restrictions on leisure activities and holidays abroad.

But just because more money is going into savings, that doesn’t mean rates are any better.

Cash ISAs had near record balances of £297 billion at end of 2020, but interest rates are at their lowest for more than 20 years, according to Office for National Statistics and Bank of England data.

Total interest paid on all cash ISAs in 2021 will be £1.22 billion, the lowest since 2000.

Financial experts Moneyfacts says there has been a “notable drop off” in cash ISA rates.

Rachel Springall, finance expert at Moneyfacts, says: “Savers may well be hoping to see some decent ISA deals as there is little time left to take advantage of the 2020-21 ISA allowance. While we have seen some deals launch, the top fixed ISAs available are in fact worse than a month ago.

“If savers were to be coming off the top one-year fixed ISA rate from March 2020 and wish to fix into the top deal today, they will note a staggering rate difference of 0.86% and on an investment of £20,000 – that is a loss of £172 in one year.”

The news puts the spotlight on investment ISAs, which almost always return more money over the long term.

Anna Bowes, of financial data company Savings Champion, adds that while cash ISA rates are currently poor it may be worth topping up old ISAs.

She says: “For example, Shawbrook Bank’s Easy Access Cash ISA Account Issue 10, which was available for a just a week in April 2020, is still paying 1.25%, substantially higher than the current best rates on the market.

“How long this rate can remain at this level is anybody’s guess, but while accounts like this are paying more than the best rates currently available it could be good to consider an old account rather than opening a new one.”

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