Best Fixed Cash ISA Rates Grow by 42 percent

According to the latest figures released, the best fixed cash ISA rates have risen by an astonishing 42 percent since December 2016, with this trend largely attributable to attempts by challenger banks to boost their business.

The market leader was reported by the Telegraph to be Charter Savings Bank, which has recently launched four new fixed-rate ISAs, is now paying 1.3 percent on its one-year ISA, pushing it ahead of Bank of Cyprus UK’s account, which currently pays 1.22 percent.

In real terms, this means that the new market leader is now paying an amazing 24 percent more than last year’s leader, which offered just 1.05 percent.

Its two-year account pays even more – 1.41 percent – placing it ahead of the second-placed ISA provider, which offers 1.36 percent. This is once again an improvement on December figures, where the best fixed cash ISA rates for a two-year option were 1.15 percent.

Improving again are the rates for a three-year account, with market leaders paying savers 1.5 percent interest; 20 percent higher than eight months ago, and a little higher than their second place competitor, which pays 1.44 percent.

The greatest improvement, however, has been the market leading rate for the premier five-year ISA, which has increased from 1.51 percent in December 2016 to 2.15 percent in July 2017 – a growth of an incredible 42 percent.

In monetary terms, this could signify an increase in earnings on a £15,000 account from £172.50 to £322.50.

It’s important to note that these rates are still lower than the current rate of inflation, although they may beat your current cash ISA’s performance, should you have one.

Fixed Cash ISAs or Fixed-Rate Bonds?

It is not only Cash ISAs that are starting to offer more competitive rates, but also fixed-rate savings bonds, with the top one-year bond now paying 1.9 percent, leading two-year bonds offering rates of 2.05 percent, three and four-year accounts paying up to 2.2 percent, and five-year accounts delivering up to 2.5 percent.

This has naturally led many savers to question which of the two would be more beneficial to them.

According to experts, there is little in it when the two are weighed in the balance, with fixed-rate bonds having the potential to pay more, but ISAs remaining indisputably useful for their tax free benefits.

So how do those faced with a decision between the two make it? By weighing the facts in the balance.

Since April 2016, the government has made a personal savings allowance available to each individual, with basic-rate taxpayers able to earn £1,000 a year in interest before they are taxed, and higher-rate taxpayers able to earn £500 before this occurs.

There is one group that does not receive such an accommodation, and that is additional-rate taxpayers, who are thus recommended to consider an ISA, as savings and interest held within one of these wrappers are not taxed.

There is a further reason that so many experts have urged savers not to forgo cash ISAs just yet, and this is because the personal savings allowance is liable to shrink should interest rates increase, which would force many to pay tax on their money.

Interesting in opening a new account? Why not take a look at Best Savings Rate’s comparison tables to see today’s best rates?

Courtney Lucas

When not feeding her 3 cats, Courtney writes about a variety of subjects, but mainly business and tech. She is interested in Fintech and the latest news regarding interest rates.