Cash Isa rates have dropped like a stone since the start of this month.
Providers pushed up their rates in April, with several offering more than 5 per cent on a one-year fixed-rate cash Isa.
But those have all disappeared, with the best rate now at 4.72 per cent from Shawbrook and OakNorth Bank. Virgin Money has a better 5.05 per cent Isa — 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.
Just outside those come some of the big banks — something we have not seen for years.
Competitive: Right now, Barclays, HSBC and NatWest will pay you a respectable 4.6% if you are willing to tie your cash Isa money up for a year
Last summer you could grab nearly a third more with Virgin Money and Zopa’s 5.54 per cent over Barclays’ 4.3 per cent.
Now, Barclays, HSBC and NatWest will pay you a respectable 4.6 per cent if you are willing to tie up your cash Isa money for a year.
Pressure from the Treasury Committee and the Financial Conduct Authority have doubtless played a part in better rates being offered.
Meanwhile, money has been pouring into cash Isas from savers who would otherwise risk having to pay tax if they stay in ordinary accounts.
Smaller providers have cut their rates to stem the flow of money before they become overwhelmed and attract more than they could lend out.
Paragon Bank had its busiest ever week at the start of the tax year with applications up 40 per cent on the same period last year. Skipton has also seen twice as many applications as last year.
Bigger banks can absorb inflows more easily because of their size. And cash Isa money is attractive because it tends to be stickier — savers don’t move it around so frequently.
Barclays is unusual in that it lets you withdraw up to 10 per cent up to three times each year and does not 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 field) and NatWest’s version run for around 13 months rather than the usual 12, and you can’t add more money after the first month.
But steer clear of the big banks’ easy-access cash Isas — their rates are truly awful.
Among the worst is Santander’s Isa Saver at 1.2 per cent. This is where it dumps your cash after you have been in its 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 per cent.
A top rate of 5 per cent will give you £1,000 tax-free interest a year on £20,000 of savings — but just £240 at Santander.
sy.morris@dailymail.co.uk
