Isa rates fall despite product choice rising - where can you find the best rates?

UK savers lose out as Isa returns start to dwindle, find out who is offering the best account

Savers have faced a tough start to 2020 with Isa rates falling, despite the number of Isa accounts available rising, according to new findings from Moneyfacts.

The figures show that although there has been an increase in the choice of Isa deals available, rates on offer have plummeted.

Currently, the average easy access Isa interest rate stands at 0.83%, down 0.12% compared to last year’s rate of 0.95%.

Rates have also tumbled on the average longer-term fixed rate Isa. Savers today could get an average interest rate of 1.29% - 0.33% less than the same time last year of 1.62%.

The table below shows how average Isa rates have changed since March 2018.

*Longer term fixed Isas are those with terms over 550 days (Moneyfacts Treasury Reports 2020)

Savings products across the board have seen rates drop. For example, the average longer-term fixed bond has fallen by 0.52% year on year and now stands at 1.37%.

The table below shows how average fixed bond rates have changed since March 2018.

*Longer term fixed bonds are those with terms over 550 days. (Moneyfacts Treasury Reports 2020)

The Bank of England’s recent decision to cut the base rate from 0.75% to 0.25% to protect the UK economy from coronavirus disruption could spell further bad news for savers and push savings rates even lower.

Eleanor Williams, finance expert at Moneyfacts.co.uk, says: “Unfortunately, although savers have more products to choose from, average rates have fallen in the last 12 months.

“For those who are in the habit of opening an ISA each year, there are still some providers out there willing to top the rate tables.

“It is still the case that challenger banks tend to lead the way, and so it is important that savers pay attention to the more unfamiliar brands if they are looking for a new deal, and of course, be willing to move fast to catch a top rate before it’s closed.

“It is worrying to consider that this could well be the peak of the ISA season, as the recent unexpected base rate cut of 0.50% back to a historic low of 0.25% may be passed on to savers in the next couple of months.

“This is likely to be concerning to many who may feel disincentivised from saving, and worrying considering that saving regularly gives people a financial cushion in case of unexpected bills and stops them having to rely on expensive credit card and bank overdraft rates, which may shortly be increasing for some customers given the recent overdraft rules.”

Best cash Isa rates

The top easy access cash Isa is the Al Rayan Bank Instant Access Cash Isa which pays 1.36% expected profit rate (EPR). 

You can open this account online with a deposit of £50. 

If you have the capacity to lock your money away for longer, you can access higher rates of return. The Al Rayan fixed term deposit cash Isa pays 1.5% EPR. 

Savers will need a minimum deposit of £1,000 to open the account. 

Aldermore currently offers the top three year fixed rate cash Isa which pays 1.55% APR and requires a minimum deposit of £1,000. 

Check out our best cash Isa rates guide for a full round up of the top-performing accounts on the market. 

NB: The rates quotes were correct as of 17/03/2020 but may be subject to change.