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Cash ISA Interest Rates Have Halved Over the Past Four Years

Personal_Finance / ISA's Jun 28, 2016 - 10:08 AM GMT

By: MoneyFacts


Long-suffering savers are likely to be all too familiar with the current state of the savings market, and while Individual Savings Accounts (ISAs) were once a competitive safe haven for savers’ cash, the last four years of rate cuts have been excruciatingly painful.

Indeed, research from can reveal that average rates, and in some cases best buy deals, have halved since the Funding for Lending Scheme (FLS) launched in 2012. In addition, since the introduction of the Personal Savings Allowance in April 2016, ISA rates have continued to plummet.

Rachel Springall, Finance Expert at, said:

“It’s clear that the FLS has had a huge impact on the savings market over the last four years, but tax efficient initiatives launched by the Government may also have also resulted in ISA interest falling to record lows.

“Before the FLS launched savers could get an easy access ISA paying 3.30%, but now the best deal on the market pays just 1.30%. The same decline can be seen in the longer-term fixed rate market - in 2012 the best five-year ISA paid 4.25% whereas today it pays a miserly 2.05%. The downward rate spiral can also be clearly seen in terms of the overall average rate - it now stands at just 1.17% compared with 2.55% in 2012, which illustrates how far the market has fallen.

“Since the Personal Savings Allowance (PSA) launched in April, we have seen significant cuts across ISAs, with some providers offering better deals on their taxable accounts than their ISA counterparts. It’s therefore fair to assume that this new allowance has reduced the appeal of ISAs, and has subsequently reduced their competitiveness yet further.

“As savers digest the Brexit result they will no doubt be concerned about the performance of their investments and they may well turn to investment in cash. Fortunately around 70% of all cash ISAs accept transfers in from stocks & shares ISAs, and with the ISA limit expected to rise to £20,000 next year, cash ISAs may become a popular haven.

“However, if providers are swamped with new money too quickly then the best buy deals could well be withdrawn from the market. Therefore, anyone looking to invest in a cash ISA may be wise to consider doing so while there are still some decent deals left to choose from.” - The Money Search Engine is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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