Are Cash ISA rates on the rise?

The Cash ISA season is heating up, with a flurry of easy access rate rises and new Cash ISA launches in the last week of February. There are now more Cash ISAs available than any time since 2009. Easy access and notice ISA interest rates are also at their highest point for 14 years. In just one week we saw seven easy access ISA rates raised, and the average rate at 1.96%.

However, there are still huge differences across the market.

Despite recent increases, the rates on offer from major high street banks, including Lloyds and Halifax, remain well below 1% for easy to access accounts.

Meanwhile, at the top of the best-buy tables, rates have pushed over 3%. So, anyone with a Cash ISA from a high street giant might well choose to vote with their feet.

You could consider opening a Coventry Building Society Limited Access product through Active Savings with a new HL Cash ISA, this pays 3% AER (2.96% tax-free) – plus a £100 bonus if you pay £10,000 or more into the product by debit card. On £10,000, this gives you an effective return of 4% (terms apply).

The rate is variable, and the 4% figure assumes the rate won’t change. For clients depositing £10,001-£20,000, the effective return will be lower. If the Cash ISA balance drops below £10,000 before 3 May 2024, we could reclaim the bonus.

Instant access products allow immediate cash withdrawals, our Cash ISA offers a Limited Access product where withdrawals usually take one working day. The Limited Access product pays interest monthly and allows up to six withdrawals a year, without being charged. You could pay a penalty on any withdrawals after that. Inflation reduces the spending power of your money.

Will Cash ISA rates rise?

We expect the easy access market to continue to inch up as we go through the ISA season.

However, with the high street giants lagging so far behind, the smaller players won’t want to go too far out in front of the rest of the pack – they don’t want to pay more than they have to for your cash. It means they might well rise from here, but not terribly quickly. So it’s less likely they’ll rise above 4%.

The fixed rate Cash ISA picture is more mixed, with some rates being cut, and others boosted. If you’re planning on fixing your ISA savings, you might be tempted to wait to see whether the ISA season produces better deals – especially if the Bank of England raises rates in March.

However, a rate rise is largely priced in, and the high street banks have plenty of cash. So you’d be relying on smaller and newer banks pushing for more cash.

At the end of the tax year, we’d always expect some banks to boost their rates. But at the moment, if they offer anything particularly attractive, they risk filling their coffers overnight and dropping the rate.

It means any movement upwards is likely to be small, and if the best rates fill their boots, they could end up being withdrawn. That means your most rewarding option could disappear.

If you’re happy with rates right now, it might be a good time to take the plunge.

This article gives you information to help you make the most of your money, but it isn't personal advice. If you're not sure if a certain action is right for you, seek advice.

Cash ISAs or savings accounts?

The personal savings allowance means basic-rate taxpayers don’t pay tax on the first £1,000 of interest from savings, and higher-rate taxpayers don’t pay tax on £500. Additional-rate taxpayers don’t have an allowance.

At a time when interest rates are higher, higher and additional-rate taxpayers with large savings balances might well want to shelter as much as possible from tax.

Basic-rate taxpayers with more modest balances could decide to leave their cash in savings accounts. Alternatively, they might decide that a Cash ISA is looking to their future – because it means they never have to worry about tax on their savings – regardless of what happens to their income, interest rates, or the personal savings allowance.

Whichever one you opt for, it’s worth shopping around for the best possible rate, and the Cash ISA season could be a great time to do just that.

Explore our Cash ISA

Explore Active Savings

This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).

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