A major warning has been issued to anyone who has a Cash ISA as rates are set to drop in the coming months. The warning comes ahead of the Bank of England’s next base rate decision on May 8.
According to the experts at Investing Insiders, Cash ISA interest rates are at their highest level in six months and with the Central Bank expected to cut rates next month these are set to come crashing down. Alongside this, there continues to be rumours of major reforms to ISAs from the Chancellor – although this is all speculation and nothing has been confirmed.
Investing Insider’s Founder and Managing Director for financial education specialists, Antonia Medlicott, says everyone with a Cash ISA should look to take advantage of the higher interest rates and lock in a fixed one before they start to drop.
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She noted that Cash ISA rates were sitting around 5%, with some offering even more with introductory rates. By locking into a fixed rate, it would give savers peace of mind” over their returns.
She said: “Most of the top-paying accounts offer ‘variable’ rates, meaning they can go up and down as the Bank of England rate fluctuates. You will generally get easier access to the cash held in these accounts.”
“Fixed rate savings accounts typically require you to lock your money away for a set period of time, but offer certainty over interest rates, no matter what the Bank of England does.”
She added: “If you have spare Cash sitting in a low-interest account, moving it into an ISA protects it from tax on interest, dividends, and capital gains.”
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According to data from Martin Lewis‘ Money Saving Expert (MSE) website, Charter Savings Bank is the top-paying fixed-rate Cash ISA at 4.27% for one year. The top two-year fix is from Progressive Building Society at 4.3%.
If you want a longer fix, the MSE team says Ford Money is paying 4.2% for three years while Close Brothers is offering 4.3% for a five-year fix. However, with Ford, you will need to deposit a minimum of £10,000.
This morning, financial markets predicted a 100% chance of a Bank of England interest cut in May as the effects of Donald Trump’s ever-evolving trade war continue to play out. Yesterday, LSEG data had the chance set at 82% for a reduction from 4.5% to 4.25%.
However, comments made by a member of the bank’s Monetary Policy Committee (MPC) – the group which decides the rate – yesterday pushed the likelihood a little higher.
Megan Greene, who voted with the majority for a hold at the last meeting in March, told Bloomberg that US trade tariffs are more likely to push down on UK inflation than raise the pace of price increases.
She told the publication that the UK’s decision not to respond to Trump’s import duties through reciprocal tariffs could help make the UK a destination for cheaper goods from Asia and Europe. She said: “The tariffs represent more of a disinflationary risk than an inflationary risk,”
She added: “There’s a ton of uncertainty around this, but there are both inflationary and disinflationary forces.”
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