ISA savers hit hard by bottomed out interest rates

ISA savers have been hit hard this year by bottomed out interest rates, newly revealed research indicates.

The best tax-free cash ISA for 2010 has dropped by 17 per cent in comparison with last year’s figures.  This represents only an earned interest of £301 for every £10,000, which compares unfavorably to the figure of £341 paid by a comparable deal in 2009.

When compared to 2008 rates the landscape has become quite bleak.  As interest rates were beginning to fall the interest paid by the best ISAs topped out at a return of £568.

The average ISA savings product paid out only a paltry 0.4 per cent in interest.  This equates to about £40 for every £10,000.  In comparison to figures that preceded the worldwide banking crisis, the average product returned around £511.

Several financial institutions pay even less, however.  Lenders such as Santander, Barclays, Halifax, and RBS pay a return of only 0.1 per cent.

Research indicates that savers need to keep abreast of their rates and switch when appropriate to maximise the return on their cash by taking advantage of new deals.

Every year building societies and banks launch a crop of new ISAs in an attempt to entice savers to using their products.  This year is no different as 65 new accounts were launched.  One out of every three have bonus rates that expire after 12 months. The resultant rate drop leaves very little in the way of savings for consumers.

Industry experts have strongly criticised this practice.  In one financial services industry insider’s opinion, building societies and banks cleverly rely on the apathy of savers when these bonus rates expire, gambling that the hassle of changing ISA providers will be too daunting for savers.

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