ISA rates fall to new low
One group who are probably feeling particularly dumped upon are those relying on savings income. We’re not talking about those with replete trust funds, but this group includes pensioners and others on a fixed income.
The Bank of England confirmed today that the historic 0.5% base rate of interest will remain in place for another record-breaking month. Good news for those looking to borrow money, but monotonously depressing news for savers. Exacerbating the problem is the Government’s new Funding for Lending scheme that came online at the latter end of last year. This provides Government-backed money to encourage banks to start lending again. And it does seem to have worked, with preliminary figures suggesting an increase in lending. Which is bound to kick-start the economy and get us all back on our feet etc etc.
But as with most things, for every action there is a consequence and at the other end of the lending seesaw sit the poor savers. Now the banks don’t even need their money- they can lend out the Government’s money instead- meaning that interest rates on savings are falling even further. Which you may not have thought was even possible.
Even ISAs, at a time when the rate traditionally starts increasing in a final push for banks to get their paws on your money for this tax year, are down in the rate doldrums. Figures from Moneyfacts.co.uk suggest that the average ISA rate last February was 2.55%pa (which is pretty dire), but that 2013 is hitting a new low with an average ISA rate of just 1.74%. There is also a fifth less ISA option to choose from.
Mind you, if you want to beat even the lower measure of inflation, the only cash ISA surrently offering a rate above 2.7% (CPI) is Coventry Building Society at 2.8%, although you cannot transfer in old ISA balances. The best rate available for transfers in is 2.5% with the Cheshire.
Sylvia Waycot, editor at Moneyfacts.co.uk, said: "Savers are desperate for some good news and the ISA season has always been a pretty reliable time for finding that account you're really pleased about. But it may be a lot harder to find this year."