Cash Isa rates have dropped like a stone since the beginning of this month.
Providers increased their rates in April, with several offering more than 5 per cent on a one-year fixed-rate cash Isa.
But they have all disappeared, and the best rate is now 4.72 per cent from Shawbrook and OakNorth Bank. Virgin Money has a better Isa of 5.05 per cent, for current account customers only.
On the High Street, the top rate of 4.7 per cent comes from Tipton BS, or 4.65 per cent from Monmouthshire Building Society along with Kent Reliance.
Right behind them are some of the big banks, something we haven’t seen in years.
Competitive: Right now, Barclays, HSBC and NatWest will pay you a respectable 4.6% if you’re willing to tie up your cash for a year.
Last summer you could get almost a third more with 5.54 per cent from Virgin Money and Zopa compared to 4.3 per cent from Barclays.
Now, Barclays, HSBC and NatWest will pay you a respectable 4.6 per cent if you’re willing to tie up your cash for a year.
Pressure from the Treasury Committee and the Financial Conduct Authority has undoubtedly contributed to better rates being offered.
Meanwhile, cash ISAS have been investing money from savers who would otherwise be at risk of having to pay tax if they stayed in ordinary accounts.
Smaller providers have reduced their rates to stem the flow of money before they became overwhelmed and attracted more than they could lend.
Paragon Bank had its busiest week ever at the start of the fiscal year, with claims up 40 percent from the same period last year. Skipton has also received twice as many applications as last year.
Larger banks can absorb capital inflows more easily due to their size. And cash is attractive because it tends to be more fixed: Savers don’t move it around as frequently.
Barclays is unusual in that it allows you to withdraw up to 10 per cent up to three times a year and doesn’t charge you for it. Normally, with a fixed rate cash Isa you pay a fee for this.
HSBC’s one-year account (its first foray into the fixed-rate Isa arena) and NatWest’s version last around 13 months instead of the usual 12, and no more money can be added after the first month.
But stay away from the big banks’ easy-access cash Isas – their rates are really terrible.
Among the worst is Santander’s Isa Saver with 1.2 percent. This is where you throw your cash after being on the Easy Access Isa for a year.
Halifax and Lloyds play the same game. The best of a bad bunch is the NatWest Cash Isa, which pays 3.2 per cent, but only if you have £25,000 or more saved. Below this, the rate is 1.75 percent.
A top rate of 5 per cent will give you £1,000 of tax-free interest a year on £20,000 of savings, but only £240 at Santander.
sy.morris@dailymail.co.uk
Check the best cash Isa rates in our savings tables
