Average ISA interest rates hit 5%

Average ISA interest rates hit 5% – top one-year fixes on offer today (Image: Getty) The average interest rate on one-year fixed cash ISAs  has hit five percent, the highest returns given since 2008. This follows 14 consecutive Bank of England Base Rate rises since December 2021, which now stands at a 15-year high of 5.25 percent. Ella Mower wrote in Moneyfactscompare’s recent newsletter: ‘Just three weeks prior the average one and two-year fixed rate bonds surpassed this threshold, and are still on an upward trajectory. ‘These movements come in a week when the Bank of England’s Monetary Policy Committee voted to increase the base rate to a new 15-year high and the Financial Conduct Authority (FCA) introduced its Consumer Duty regulations.’ The n ew FCA regulations are expected to put pressure on some providers to increase their low-paying savings rates and be more transparent with customers about where they’ll be able to snap up a better deal. The ISA allowance for the 2023/24 tax year is £20,000 (Image: EXPRESS) Ms Mower added: ‘Standing at 5.01 percent gross as of yesterday, the average one-year fixed rate ISA is at its highest point since November 2008.’ Cash ISAs offer a number of additional savings perks, such as enabling money to grow without people having to pay tax on the interest above the Personal Savings Allowance (PSA). ISAs that offer a fixed rate of interest can also help add another layer of certainty to saving, as it means the bank or building society cannot change the rate during the length of the term. According to Moneyfactscompare, the provider currently topping the list of one-year fixed cash ISAs is Paragon Bank with an Annual Equivalent Rate (AER) of 5.75 percent. The account can be opened with a minimum deposit of £500 and up to £500,000 can be invested overall. Interest can be applied monthly on the day the deposit was first paid or annually on the anniversary of making the opening deposit. Account holders must be aged 18 or over and UK residents for tax purposes and this is a Flexible ISA. This means funds withdrawn can be added back to a person’s ISA allowance in the same tax year. However, any withdrawals made before the fixed term ends will be subject to 90 days’ loss of interest. Shawbrook Bank falls just behind with its One Year Fixed Rate Cash ISA Bond (Issue 79) boasting an AER of 5.71 percent. The account can be opened with a minimum deposit of £1,000 and up to £250,000 can be invested overall. Interest is calculated daily and can be applied monthly or annually. Account holders must be aged 18 or over and UK residents for tax purposes and joint accounts are not permitted. Withdrawals made before the fixed term ends will also be subject to 90 days’ loss of interest. Virgin Money is also offering an AER of 5.71 percent on its One Year Fixed Rate Cash E-ISA (Issue 611). The account can be launched online with a minimum deposit of £1 and interest can be paid monthly or annually. Savers must be UK residents aged 16 or over and only one account is allowed per customer. Withdrawals are also permitted, however, these will be subject to a charge equivalent to 60 days’ loss of interest on the amount withdrawn, if made during the specified fixed term. Savers with Virgin Money can also have access to special deals across the wider Virgin Group that can help people save on everyday essentials, as well as days out and holidays.