ISA savers have been hit harder than most by the recent Bank of England base rate cuts after new research showed that the banks and building societies have lowered interest rates more than for ordinary accountholders.
Since the government introduced the tax free savings that ISAs could bring almost 10 years ago savers have put away nearly £160 billion. In recent times it has proven to be the only way to beat inflation and actually see a real increase in the value over time.
The 10 largest savings bodies in the UK have cut their cash ISA rates by more than the interest offered on their standard savings accounts since February 2007 when the base rate was first cut to 5.5% but the research doesn’t even include the latest percentage point cut which will likely see ISA accounts suffering even more.
All of this is being played out to the backdrop of increasing pressure on the government to help savers further after they bailed out banks to the tune of billions of pounds only to see the heartless organisations pass on the rate cuts.
Unbelievably, there are now 10 ISAs paying less than the Bank of England’s base rate while average ISA rates have fallen by 2.05 percentage points compared to the 1.97 point drop by easy-access accounts.
With the full impact of the most recent rate cut not likely to be known until the start of next month it is possible that savers could see another 1% knocked off the headline rates. David Black of Defaqto suggests that it is well worth checking your own ISA to see how competitive it stands in the current market but reminds you to check whether transferring to a new provider maintains the tax-free status of your savings.