The number of fixed interest rate Individual Savings Accounts (ISAs) has risen tenfold over the
past decade. That’s the conclusion of new research from Moneyfacts which shows that banks are
increasingly reliant on savers’ cash to fund their mortgage lending.
Ten times more fixed rate ISAs than a decade ago
The Moneyfacts research found that there are currently 139 fixed-rate ISAs on the market,
compared with just 14 a decade ago. Indeed, there has been a sharp rise in fixed rate ISAs over the
last couple of years, with just 56 products available in 2009 and 93 in 2010.
The Independent reported that ‘the group attributed the rise in the number of accounts to lenders’
reliance on using money deposited with them by savers to fund their mortgage lending following the
credit crunch.’
Fixed rate ISAs give banks certainty
The majority of fixed rate ISAs require savers to commit their money for a specified period. It is this
certainty which appeals to banks as they know exactly how long they expect to hold the cash for.
Michelle Slade, spokeswoman for Moneyfacts.co.uk, said: “The increased need to attract savers’
money has led to a surge in the number of fixed-rate ISAs on the market.
“Savers are less likely to withdraw tax-free savings over standard savings, making them a key market
for providers looking to use in-house funding sources for lending activities.
“If savers have fully utilised their ISA allowance each year since launch they could now have a tax-
free savings pot of around £70,000.
“Providers are keen to not only attract such sizeable balances, but to also keep them, making fixed-
rate ISAs a target market.”
The Independent highlights ISAs offered by Skipton Building Society (a five-year fixed-rate ISA at 4.5
per cent) and the Bank of Cyprus (one and three-year fixed rates at 3.3 per cent and 4.1 per cent
respectively.)
