Derin Clark

Derin Clark

Online Reporter
Published: 06/05/2020

It is one month since the new ISA year started and savers who are looking to open a new cash ISA to utilise their 2020/21 ISA allowance should consider opening one sooner rather than waiting as both easy access and fixed rate ISA average rates have fallen over the last month.

Our research has found that over the last four weeks the average rate on an easy access ISA fell by 0.17%, from 0.76% on 6 April to 0.59% today. Within fixed rate ISAs the average two year ISA saw the biggest fall of 0.16%, down from 1.04% on 6 April to 0.88% today, while the average one year fixed ISA rate fell by 0.11%, from 1.01% to 0.90%. The average rate on a five year fixed ISA also fell during the last month, seeing a reduction of 0.03%, down from 1.29% to 1.26%.

 

Average ISA rates (based on £10,000 gross)

  8 April 2019 6 May 2019 6 April 2020 Today
Easy access ISA 0.97% 0.97% 0.76% 0.59%
One year fixed ISA 1.35% 1.34% 1.01% 0.90%
Two year fixed ISA 1.45% 1.42% 1.04% 0.88%
Five year fixed ISA 1.91% 1.89% 1.29% 1.26%

 

Competitive ISA rates still available

While the average ISA rates have been falling there are still some highly competitive rates available in the ISA charts. Currently, savers looking for an easy access ISA can get a top rate of 1.25%, which is available from Penrith Building Society’s ISA Issue 2. The top rate in the one year fixed rate ISA chart currently comes from Ford Money, which pays a rate of 1.25% on its Fixed Cash ISA 1 Year. In the two year fixed rate ISA chart the best rate available comes from Al Rayan Bank, which pays an expected profit rate of 1.40% on its Fixed Term Deposit Cash ISA. The best rate in the five year fixed rate ISA chart is also an expected profit rate of 1.40% from Gatehouse Bank on its 5 Year Fixed Term Cash ISA.

 

Best Buy ISAs (based on £10,000 gross)

  8 April 2019 6 May 2019 6 April 2020 Today
Easy access ISA Yorkshire Building Society - 1.46% Skipton Building Society - 1.48% Penrith Building Society - 1.25% Penrith Building Society - 1.25%
One year fixed ISA Shawbrook Bank - 1.77% Principality Building Society - 1.66% Aldermore - 1.35% Ford Money - 1.25%
Two year fixed ISA Charter Savings Bank - 1.95% Charter Savings Bank - 1.82% Charter Savings Bank - 1.46% Al Rayan Bank - 1.40%
Five year fixed ISA Shawbrook Bank - 2.30% Shawbrook Bank - 2.30% Paragon Bank - 1.60% Gatehouse Bank - 1.40%

Please note, Al Rayan Bank and Gatehouse Bank pay an expected profit rate as they are Islamic banks. 

 

Commenting on the current ISA market, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Time passes by quickly, perhaps more so for those in lockdown, so it’s understandable if savers are surprised to realise it has been a whole month since the new tax year began. Amid the turmoil that the Coronavirus has created, opening a new ISA may not have been a priority, but now is as good a time as any to act.

“Cash ISA rates outperformed stocks and shares ISAs on average during the 2019/2020 tax-year, with the latter suffering an average loss of 13.3%, and there may well be savers unnerved by such volatility who could be looking to switch some of their money out of investment funds and into cash ISAs instead . Unfortunately, if savers didn’t make a move a month ago, they will be disheartened to find that interest rates on cash ISAs have fallen, so much so that both the average one and two-year fixed ISA rates have dropped below 1%.

“Savers who are looking to move their ISA pot now must transfer their ISA using the appropriate process, so that the cash doesn’t lose its tax-free wrapper. Another important fact to keep in mind is to consider the Personal Savings Allowance if it applies to them, particularly if they want a fixed rate deal to guarantee a return over the next year or more. Generally, fixed rates outside of an ISA wrapper are more lucrative, so its vital savers compare deals and choose carefully.

“As it stands, savers may prefer to choose an easy access ISA should they want the peace of mind of having their cash close to hand. Currently, Penrith Building Society pays the top rate of 1.25%, closely followed by Al Rayan Bank, which pay 1.10% expected profit rate. Those savers happy to give notice to access funds will also find a notice cash ISA a good alternative. Monmouthshire Building Society pays the top rate on its 30-day notice ISA of 1.25%, matched by Bank and Clients on its 90-day notice ISA and currently Paragon Bank pays 1.10% on its 120-day notice ISA.

“There is no telling how much interest rates could continue to be impacted over the coming months, so savers may wish to consider using any free time they have to research and open a competitive deal so that they can avoid the disappointment of missing out.”

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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