Cash Isa rates creep above 2 pc . . . at last!

CASH isa rates on shortterm fixed deals are finally climbing above 2 pc.

after months of lacklustre taxfree returns for savers, a flurry of deals from building societies and challenger banks is putting High Street rivals in the shade.

Marsden Building Society has launched a two-year fixed-rate cash isa at 2.05 pc, matching coventry Building Society — that’s £205 a year on £10,000.

Principality BS, Skipton BS, Shawbrook Bank and Virgin Money all pay a slightly lower 2 pc. Of the big High Street names, only Halifax pays 2 pc.

Until recently, you’d have had to tie up your cash for three years to earn such a rate of interest.

Santander, NATWEST and lloyds only pay 1.25 pc on two-year fixes.

Rates are also rising for oneyear fixed-rate cash isa deals — Holmesdale BS, tesco Bank and Shawbrook all pay 1.75 pc.

Meanwhile, big High Street providers are lagging behind with a top rate of 1.65 pc from nationwide and 1.6 pc from Halifax. NATWEST pays just 0.9 pc.

Pick the top deal at 1.75 pc instead and you will see an extra £85 interest a year on £10,000.

it’s the same for easy-access cash isas, where some savers, such as those in Santander’s easy isa, earn a miserly 0.1 pc.

Switching to the top deal of 1.51 pc from Virgin Money means an extra £150 a year on the same £10,000 deal. But it is worth pointing out that by fixing for two years you run the risk of missing out on better deals if the Bank of england raises the base rate, as is expected next year.

However, there is no guarantee that banks or building societies will pass on any rise if it happens sooner rather than later.

the new deals are a wake-up call for savers to check their taxfree rates. cash isas are popular — a huge £257 billion of savers’ cash is held in them — because interest is tax-free.

in the tax year to april 2015, savers opened ten million accounts and put in an average £ 6,000, government figures revealed last week.

that’s two-thirds more than the £3,700 of the previous tax year, following the increase in the annual cash isa limit to £15,000.

traditionally, providers come out with new accounts in the spring — around the end of one tax year and the beginning of the next — to woo savers looking to use their cash isa allowance.

But this year they failed to raise their rates. now there are signs things are changing.

Sue Hannums, director of advice website savingschampion.co.uk, says: ‘We have turned the corner on rates. even so, some big providers are still cutting rates on older easy-access isas.’

BM Savings, part of Halifax and once among the top payers on easy-access cash isas, has halved the already poor 0.5 pc on its easy-access isa to a meagre 0.25 pc. So, too, has aa Savings.

Barclays instant cash isa rates have tumbled by 0.49 percentage points to as little as 0.8 pc, depending on how much you have saved. For the past two years, this deal has been a popular choice, paying as much as 1.49 pc on £30,000 or more. these are the latest of 283 cuts on easy- access cash isas meted out to savers this year, figures from Savings champion reveal. the figure is already ahead of the 282 for the whole of last year and could grow even more in the next four months. But big providers already pay poor rates. With Halifax isa Saver Variable, you earn just 0.5 pc after a year, 0.25 pc in its isa Saver Online and 0.1 pc in its Variable Rate isa Saver. NATWEST cash isa rate is also a poor 0.5 pc on balances up to £25,000.