Cash Isa rates have dropped like a stone since the start of this month.
Providers increased their rates in April, with several offering more than 5 per cent on a one-year fixed rate Isa.
But those are all gone, with the best interest rate now at 4.72 percent from Shawbrook and OakNorth Bank. Virgin Money has a better Isa at 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 together with Kent Reliance.
Just outside there will be some large banks – something we haven’t seen for years.
Competitive: Currently Barclays, HSBC and NatWest will pay you a respectable 4.6% if you’re willing to tie up your cash Isa money for a year
Last summer, Virgin Money and Zopa’s 5.54 percent could get you almost a third more than Barclays’ 4.3 percent.
Now Barclays, HSBC and NatWest will pay you a respectable 4.6 per cent if you’re willing to tie up your cash Isa money for a year.
Pressure from the Treasury Committee and the Financial Conduct Authority have undoubtedly played a role in offering better rates.
Meanwhile, money is flowing into the Isas of savers who would otherwise be at risk of paying tax if they were left in a regular account.
Smaller providers have lowered their rates to stem the flow of money before they become overwhelmed and take on more than they can lend.
Paragon Bank had its busiest week ever at the start of the fiscal year, with applications up 40 percent compared to the same period last year. Skipton has also seen twice as many registrations as last year.
Larger banks can absorb inflows more easily because of their size. And cash is attractive because it tends to be stickier; savers don’t move it that often.
The special thing about Barclays is that you can withdraw up to 10 percent a maximum of three times a year and you will not be charged any fees for this. Normally with a fixed interest money Isa you pay a fee for this.
HSBC’s one-year account (the first foray into the fixed rate Isa field) and NatWest’s version have a term of around thirteen months instead of the usual twelve, and you can’t add more money after the first month.
But stay away from the easy-to-access cash Isas from the big banks; their rates are truly terrible.
One of the worst is Santander’s Isa Saver at 1.2 percent. This is where it dumps your money after you’ve been in the Easy Access Isa for a year.
Halifax and Lloyds are playing the same game. The best of a bad bunch is the NatWest Cash Isa, which pays 3.2 per cent, but only if you’ve saved £25,000 or more. Below that, the rate is 1.75 percent.
A top rate of 5 per cent gives you £1,000 tax-free interest per year on £20,000 of savings, but only £240 at Santander.
sy.morris@dailymail.co.uk
See the best cash Isa rates in our savings tables