The cash ISA market is deteriorating at "such an alarming rate" that fixed rate bonds are now "far superior when comparing both average returns and the best available deals", latest research has shown.
According to moneyfacts.co.uk, the average savings rate for a two-year fixed ISA is 1.08%, compared to 1.37% for a two-year fixed bond. Furthermore, the rate for a five-year fixed ISA is 1.68% compared to 1.93% for a five-year fixed bond.
In September 2012, the average savings rate for a two-year fixed ISA was 3.07% and 3.89% for a five-year fixed ISA.
"It's shocking to see just how much interest has been lost on ISAs in the last few years," moneyfacts.co.uk finance expert Rachel Springall said.
"Savers may have turned to ISAs for their tax-free benefits, but thanks to the Personal Savings Allowance (PSA), that appeal has diminished and could well be deterring new investors."
Figures from HMRC show that the amount of new money invested in cash ISAs fell by £19.5bn from the 2015/16 tax year to 2016/17.
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