Nationwide has become the latest big-name savings provider to cut the interest rates on its range of cash Isas, to reflect what the building society says is the general decline in returns across the market.
Despite no change in the Bank of England base rate, on 1 June Nationwide imposed cuts of up to 0.5% across the board – including online Isa deals that had been market-leading.
The rate paid on its popular Flexclusive Isa (issue 7) has fallen from 1.75% to 1.2%, the biggest cut. Despite the chop, 1.2% is still a relatively good deal in today’s deflated savings market.
Susan Hannums, a director at Savingschampion.co.uk, says the society is by no means the only provider to cut rates, as cash Isas have been slowly losing appeal with providers.
“This year’s so called Isa season running from February to May was a bit of a non-event. Sadly, rate reductions for both new and existing savers have become part of a daily ritual and cash Isa savers have been hit particularly hard.”
Hannums says Metro Bank recently joined in on the act, cutting the rate for its existing Isa savers on a selection of accounts – although, again its rates remain competitive.
Birmingham Midshires cut many of its Isa products to a paltry 0.25% at the end of March, while the Furness building society similarly dropped rates at the beginning of May. Marks & Spencer is cutting its Advantage Cash Isa Option from 1.3% to 1.1% on 28 July.
“Metro Bank was one of the only providers left in the savings market that hadn’t reduced existing savers rates which clearly signals that no saver is now immune from seeing a reduction in their rate,” says Hannums. “Overall it’s clear that Isas have been hit harder than standard savings account.”
A Nationwide spokesman says: “Many of our competitors have cut their savings rates over the last few months. We have had to react to these market changes to ensure the rates that we do pay on our savings enable the society to continue operating a sustainable business model.”
The overall cuts mean most savers will have to move their money if they want to grab a decent rate.
Switching Isas is pretty easy and there are some much better deals out there. The stand-out product is from Al Rayan Bank. It is offering the equivalent of 2.02% on its 120-day notice Isa account. This is way above the rest of the market, and crucially transfers in are allowed. The bank operates under Islamic finance principles, and the rates displayed represent the expected profit rate.
The Yorkshire/Clydesdale bank is offering 1.5% with 40 days’ notice, on balances of £15,000 – but sadly it doesn’t allow transfers in from other providers. The next highest paying account that will allow you to transfer in your existing balance is the Coventry. Its Easy Access Isa 3 is paying 1.3%.
