Cash ISA rates reach a 10-year high – should you put your money in one?

Cash ISAs have become sacred for savers as rates reach a 10-year high, new data reveals. 

You can earn 3.3% on the average easy-access cash ISA- up from ten years ago when the average cash ISA rate stood just below a measly 1.3%, research by Moneyfacts shows. 

It comes as the string of 14 consecutive base rate hikes by the Bank of England pushed up returns on savings- including ISA and non-ISA products. 

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But the Personal Savings Allowance (PSA) hasn’t budged since it was introduced in April 2016, which means higher interest rates are pushing more people into paying tax on savings interest. 

As a result, cash ISAs look much more desirable than in previous years. “Cash ISAs could be a better option, particularly for higher rate taxpayers with a large nest egg,” Rachel Springall, Finance Expert at Moneyfacts says.

However, you might have to act fast to bag the top rates as the savings market has taken a hit since the BoE paused interest rates at 5.25% for the fourth consecutive time. 

Find out what’s available on the cash ISA market right now and why you might need to grab hold of these rates quickly. 

What does the cash ISA market look like right now? 

According to Moneyfacts, here’s how the average rate on cash ISAs has changed over the past ten years. 

So, you could earn around a mere 1% to 2% if you saved in a cash ISA in February 2019 or prior. 

Whereas in 2024, you can earn an average of more than 3%- and that’s just on an easy-access ISA.

An easy-access cash ISA is great if you’re looking to save in the short term and you need access to your cash regularly, as there are no penalties to withdraw your savings. 

That goes for most easy-access cash ISAs, but some do come with restrictions on accessing your cash, so it's important to read the small print. For example, the Moneybox cash ISA only permits up to three withdrawals per year. 

Plus, easy-access cash ISAs offer flexibility. This means any savings withdrawn from your ISA can be put back into the account without it affecting your ISA allowance. 

If want to save for a little longer (still under 5 years) and you are looking for a better rate, a fixed ISA might be better suited. 

“Those savers who locked into the top one-year fixed ISA this time last year will be pleased to see they can earn 1.00% more in the equivalent Cash ISA,” says Springall.  

“If consumers prefer to invest over the longer term, they will find the top five-year fixed ISA pays significantly more than the equivalent back in 2019.”

What are the best cash ISA rates? 

Right now, you can earn more than 5% on a cash ISA. These are the top rates. 

“Cash ISAs have been an essential way for consumers to protect their savings returns from tax, and they are still worth taking advantage of today,” Springall advises. 

While you might not want to use your full £20,000 allowance in a cash ISA, see 10 other ways you can make use of your ISA allowance before the new tax year starts on 6 April.  

Act fast to get the top ISA rates 

Whilst ISAs are currently in their prime era, they might not stick around for long- so you will need to act quickly before the top deals slip out of your hands in a matter of weeks. 

For example, in November we saw some big jumps from Shawbrook Bank which dropped the rate on its one-year fixed cash ISA from 5.83% to 5% and more recently Skipton Building Society’s one-year fixed cash ISA, which plummeted from 5% to 4.6% in January. 

Data from Moneyfacts shows the average cash ISA showed its biggest monthly decline in January. Plus, MoneyWeek has been tracking the best cash ISAs and has seen 18 fixed products fall in rate in January, on one to three-year fixed ISAs. 

Easy-access cash ISAs have been falling at a steadier pace, with only three products dropping in rate in January. 

Despite falling rates, they still remain high, topping 5%. 

With Moneyfacts data showing 46 fewer cash ISA options on the market in January compared to the previous month, time is of the essence to snap up the best rates while they remain at a ten-year high.