Small banks trump rivals for Isa rates

NEW banks are launching toppaying fixed-rate cash Isas — but rates still lag behind those on fixedrate bonds over the same term.

Last week, Virgin Money upped the rate it pays on its one-year fixed-rate cash Isa to 1.41 pc for new savers. Aldermore quickly followed, pushing its rate up to 1.35 pc.

Other top accounts include Charter Savings Bank and AA Savings, where the deposit-taker is Bank of Ireland, both at 1.36 pc.

On taxable fixed-rate bonds, you can earn 1.81 pc with online Charter Savings Bank.

For two-years, the top Isa rate is 1.72 pc from Charter Savings Bank, followed by 1.65 pc from Aldermore Bank. But on fixed-rate bonds, Secure Trust Bank pays 2.06 pc.

On both bonds and cash Isas, the rates are far higher than with the big banks, which still pay lousy rates. Lloyds pays a miserly 0.4 pc on its one-year fixed-rate bond. At Halifax, the rate is 0.45 pc, while at HSBC, it is 0.5 pc.

At 0.4 pc, you earn just £40 interest on each £10,000 over a year.

By choosing a new bank, you can increase your interest more than fourfold to £ 181 with Charter Savings Bank.

Big banks also pay a pittance on fixed-rate cash Isas. At Lloyds, the rate is 0.5 pc for two years, while Halifax offers 0.5 pc for one year.