Fixed ISA rates slashed - grab the top rates while you can

Fixed cash ISA rates are coming down amid interest rates freezing and falling inflation. Here’s why you need to grab the top rates before they get pulled

Roller Coaster of interest Rates And Inflation
(Image credit: DNY59)

Despite the attractive tax wrapper, cash ISAs have historically received a poor reception from savers due to their poor rates. But the last two years have seen rates on both savings and ISAs creep up, allowing cash savers to enjoy tax-free returns with rates hitting 6%.

While banks have been slow to pass on interest rate hikes despite 15 consecutive base rate hikes, competitive rates have returned to the ISA market and saving rates on some accounts now surpass inflation for the first time in two years

But, since the Bank of England put a halt to interest rate rises in September and held it at 5.25% in October, research shows rates on fixed cash ISAs are now falling, meaning unless you act now, you may miss out on the top rates - especially if the Bank of England continues to keep the Base rates at the same level.  

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Rachel Springall, finance expert at Moneyfacts, said: “There have been sizeable month-on-month cuts not seen since 2020 and it is the first time that ISA rates have fallen in over two years. There are expectations for interest rates to drop in the months ahead, so fixed savings rates could fall further before the year is over.” 

Find out what the ISA market looks like right now and how it compares to the rest of the savings market. 

Top fixed ISA rates cut

According to Moneyfacts, the average one-year fixed rate ISA went up from 0.56% in November 2021 to a whopping 5.2% in November 2023. 

But, just as we have seen with other savings accounts like one year fixed bonds and easy access accounts, it seems that rates on cash ISAs may also have reached their peak.

MoneyWeek research shows that one-year fixed ISAs reached heights of nearly 6% between August to September, but we are now seeing those rates slide as of this week.

Swipe to scroll horizontally
Bank providerOld rate AERCurrent rate AER
UBL UK5.77%5.3%
Virgin Money5.76%5.31%
Paragon Bank5.75%5.2%
Aldermore 5.71%5.4%

Currently, two and three-year fixed ISAs are offering less than what you can earn if you fix for one year. The top two-year fixed ISA is now offering 5.15% by Zopa and the top three-year fixed ISA falls even further to 5.15%, by Cynergy Bank.

How do fixed cash ISAs compare to the rest of the savings market? 

If you are looking for the top rate, then you may find a one year fixed savings account will earn you more, with Metro Bank Paying 5.91%. 

Currently the top cash ISA rate is 5.85% via Virgin Money.

But, of course, with an ISA you can shield your earnings from the tax man with the £20,000 ISA allowance.

If you are saving, there is a chance you could fall into the tax trap. If you are saving in an account earning you 5% interest, you are likely to pay tax once you hit around £20,000 in savings.

If you haven't yet used your tax free ISA allowance, now is a good time to make the most of it to protect your returns.

What could happen at the Autumn Statement? 

The Chancellor Jeremy Hunt is expected to announce an ‘ISA shake-up’ in tomorrow’s Autumn Statement. 

We can expect lenders to be pushed to offer more competitive rates and for the ISA allowance to be boosted by an extra £5,000, to help the economy grow. 

Find out more about what to expect on ISA reforms in the Autumn Statement

Vaishali Varu
Staff Writer

Vaishali has a background in personal finance and a passion for helping people manage their finances. As a staff writer for MoneyWeek, Vaishali covers the latest news, trends and insights on property, savings and ISAs.

She also has bylines for the U.S. personal finance site and Ideal Home, GoodTo, inews, The Week and the Leicester Mercury

Before joining MoneyWeek, Vaishali worked in marketing and copywriting for small businesses. Away from her desk, Vaishali likes to travel, socialise and cook homely favourites