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ISA rates slump to record lows

Dwindling interest rates have seen average savings rates for ISAs drop to their lowest levels since records began in 2008, according to Moneyfacts.

During the first six months of the year, the average easy access ISA rate tumbled to a low of 0.45%, from 0.85% in January.

Cuts to the base rate of interest from 0.75% to 0.25% on 11 March 2020, and to 0.1% on 19 March, followed by COVID-19, were behind the fall.

At the same time, the number of savings products available, including ISAs, slumped from 1,785 in January to 1,456 available in June - down 329.

Moneyfacts expects the choices of ISA products available to savers to plummet further in the second half of the year.

It said ISA providers are adjusting their rates or withdrawing offers entirely as savers look for a safe haven.

Rachel Springall, finance expert at Moneyfacts, said:

"It is clear to see the coronavirus pandemic and subsequent base rate cuts have had a catastrophic impact on the savings market.

"Savers may well have more disposable income as a result of the lockdown, and perhaps wish to safeguard this money by using a savings account.

"Easy access accounts continue to be a firm favourite among savers, but more so for their convenience than for the interest they can earn.

"With the unsettled landscape the pandemic has instilled, savers may wish to have an emergency fund they can access quickly for peace of mind."

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