ISA savers issued ‘crucial’ warning as interest rates slip to record low – should you act?
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Individual Savings Accounts (ISA) are a way in which many people save some of their money. There are four different types of ISA, with these being cash ISAs, stocks and shares ISAs, innovative finance ISAs and Lifetime ISAs.
Money can be saved in ISAs tax-free, which may be a perk for some who have exceeded the personal savings allowance (PSA).
In the 2020 to 2021 tax year, the maximum amount a person can save in ISAs is £20,000.
Furthermore, it’s only possible to put money into one of each kind of ISA each tax year.
As with other savings accounts, cash ISA savers will no doubt want to ensure their savings are working as hard as possible.
While not all interest rates have slipped back to the record lows seen in August 2020, new analysis by Moneyfacts.co.uk has found easy access ISAs have dipped below.
The Moneyfacts UK Savings Trends Treasury Report shows the average easy access ISA rate in November 2019 was 0.87 percent.
In August 2020, this rate had reduced to an average of 0.32 percent.
Despite a slight rise to 0.35 percent last month, now, the average has slipped again to 0.31 percent.
Meanwhile, the average one-year fixed rate ISA stood at 1.21 percent in November last year.
August 2019 saw the average stand at 0.56 percent, later rising to 0.62 percent in October.
Now, Moneyfacts research has found the rate is an average of 0.58 percent.
Furthermore, the number of live ISA options has substantially reduced.
Moneyfacts Treasury Reports show there were 422 in November last year, and just 356 this year.
Commenting on the savings market, Rachel Springall, Finance Expert at Moneyfacts, said: “The competition seen throughout September appears to have been short-lived as providers adjusted their offerings during October, impacting product choice and rates.
“Clearly, these changes bring to light the necessity for savers to act quickly to take advantage of the top rates as the market remains unpredictable.”
Addressing ISA holders in particular, Ms Springall spoke of the importance of checking the interest rates savers are receiving – and seeing if there’s better options out there.
“It is crucial that savers review their existing ISA rate, especially if they had locked into a fixed deal that is due to mature,” she said.
“The average one-year fixed ISA rate stands at 0.58 percent, down by 0.63 percent over the past 12 months, so there unfortunately hasn’t been an autumn ISA season for savers this year.
“However, consumers may well be looking to secure a fixed deal, but speed is key to take advantage.
“Savers may also have to consider other ways to access the top deals too, such as the market-leading one-year fixed ISA from Virgin Money at one percent, which is only available to consumers who have or open a current account.”
The finance expert added: “Market volatility may now force the hand of savers to review rates on a more frequent basis, rather than a month-by-month check, as rates are changing much more frequently.
“This may also pose a challenge for savings providers who are attempting to retain a competitive offering, but perhaps are inundated by demand for the top rates and must then change their deal fast.
“Therefore, keeping on top of the trends in the market will be essential at such a crucial time for providers and savers alike.”
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