Banks Entice Savers into Fixed Cash ISAs

By: MoneyFacts

High demand for savers’ money has led to a sharp rise in the number of fixed rate ISAs.

In the last two years alone the number of fixed rate ISAs has more than doubled from 56 in March 2009, to 139 today.

Michelle Slade, spokesperson for Moneyfacts.co.uk, commented:

“The increased need to attract savers money has led to a surge in the number of fixed rate ISAs on the market.

“Savers are less likely to withdraw tax-free savings over standard savings, making them a key market for providers looking to use in house-funding sources for lending activities.

“If savers have fully utilised their ISA allowance each year since launch they could now have a tax-free savings pot of around £70,000.

“Providers are keen to not only attract such sizeable balances, but to also keep them making fixed rate ISAs a target market.

“Most fixed rate ISAs don’t allow access during the term, so providers can be certain how long they will have savers’ money for.

“The reward for this lack of access means that fixed rate ISAs typically pay higher interest rates than variable rate ISAs.

“The highest rates are offered on longer term fixed rates, but most savers prefer to make shorter term commitments.

“Savers looking to fix for longer periods need to consider that the rate may be far less competitive in a few years’ time when bank base rate has risen from its current all-time low.

“If ISA savers want to ensure they benefit from base rate rises as they occur then variable rate cash ISAs may be a more suitable option.”

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