Business

Savers see Isa rates fall to record low

Piggy bank Image copyright PA

Returns on tax-free savings have fallen to their lowest level since comparable records began in 2011, according to the Bank of England.

The average interest rate for a cash Individual Savings Account (Isa) fell to 1.43% in August, the Bank said.

Returns from notice accounts, including Isas, are at their lowest since those particular records began in 1999.

Analysts believe there is little chance of an imminent rise in the Bank rate, so savings rates will remain low.

Savers who also have a mortgage are likely to benefit from low borrowing costs for the same reason, with rates for home loans currently at historically low levels.

Interest rates have been at low levels for six years, with the Bank Rate having been held at 0.5% since March 2009, but banks and building societies have trimmed them even further in recent months.

Two weeks ago, 400,000 savers who held Isas with government-backed National Savings and Investments (NS&I) were told their rates would be cut from 16 November.

NS&I will cut the rate on its tax-free Isa account to 1.25% from 1.5%.

Notice accounts tend to pay higher interest rates as savers must wait for an agreed amount of time before withdrawing money from the account, but rates on these deals have been falling too.

Many banks and building societies are competing for customers by offering better interest rates or incentives on current accounts, rather than savings accounts.

Related Internet links

The BBC is not responsible for the content of external Internet sites