Cash ISA savers have seen a further drop in the return they earn on their money, despite average interest rates on all other savings accounts rising slightly in March.
Official figures from the Bank of England reveal that rates on instant access, notice and fixed-rate accounts, while still depressingly low, did see a slight uplift last month. Instant access deals, for example, now pay on average 0.19%, up from 0.16%. However, this is still a far cry from the average rates seen last March of 2.47%.
Fixed-rate deals have also become slightly more competitive, with average deals now paying 2.65%, up 0.02% from February. Again, however, they pay significantly less than last year, when average rates were around the 5% mark.
Despite the slight uplift on fixed and variable-rate accounts, cash ISA savers have little cause for celebration – rates actually fell in March, from 0.96% the previous month to just 0.63%. This means that in the past year, rates on cash ISAs are down a whopping 4.18%.
David Black, head of banking at Defaqto, says the reason for rate on instant access deals increasing could simply be down to the fact that they were so low already they literally couldn't fall any further.
Defqto's figures show 60% of instant access deals now pay less than 0.5% AER on a £1,000 balance, while 50% pay less than 0.25%. In contrast, its figures show the average AER across all cash ISA is 2% (on a £3,500 balance). Opting for a fixed-rate ISA will see you earn an average rate of 2.96%.
Kevin Mountford, head of banking at moneysupermarket.com, agrees that rates on best-buy ISAs tell a different story to average rates. "With banks fighting tooth and nail to attract retail inflow there are still some good savings products available despite the low rate environment [and] there are some good early-bird ISA deals for the new season offering between 3% and 3.5% interest."
According to research from Confused.com, 22 million UK savers have no idea what level of interest they currently earn on their main savings account.
Rumina Hassam, personal finance expert at uSwitch.com, says: “Over the last six months the Bank of England base rate has been cut six times from 5% to an all time low of 0.5%, and there have been concerns over a savers’ revolt.
"This has been further fuelled by figures which indicate that savers have withdrawn £2.3 billion from banks in January. It is of little wonder therefore that more than 22 million savers have no idea what level of interest they currently earn on their main account.”