Record low rates across all savings accounts – as experts predict Isa season is ‘dead’
T he average for a one-year-fixed rate account had dropped to 1.12pc, down from 2.43pc; and for two-year fixed-rate accounts the average was 1.15pc last month, down from 3.29pc five years ago.
Variable cash Isa rates have also plunged: five years ago they paid 2.41pc on average; today this has fallen to 0.81pc.
Rachel Springall, an analyst at rate-watching service Moneyfacts.co.uk, said: “The problem we have right now is that we’ve still got many of the providers who don’t need savers’ money at the moment and as a result, rates have fallen, with top deals being available for only a short period of time.
She warns that banks may be exploiting the introduction of the personal savings allowance next month as another reason to cut returns.
“The introduction of the personal savings allowing (PSA), which is due to come into place next month, could also be playing a part in exacerbating the downward slide, she said (see below).
She reckons that banks are effectively grabbing some of the tax savings that their customers will make following the introduction of the PSA.
At that point interest will be paid gross.
“It’s very difficult for savers at the moment, particularly those who rely on their savings interest as extra income. In the next six to twelve months the rate cut trend and disappearing best deals is expected to continue.”
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Personal savings allowance
From April 1, everyone will get a personal tax free allowance for interest earnings on savings, as announced by the Chancellor last year.