Rising rates prompt more cash ISA savers into action

The past year has seen a rise in the number of people checking their cash ISA, new consumer research by AJ Bell has found.

A survey by the investment platform indicated that 50% of cash ISA savers had checked the rate of interest on their ISA in the last year, compared to 34% of savers a year ago.

The research, based on a study of 1,000 cash ISA savers during February, revealed that 68% of people have never moved their Cash ISA to a new provider to get a better rate.

On average, people thought they were getting an interest rate of 0.5%, although a quarter thought their rate was higher than that. The findings also showed that 22% don’t know what rate they were getting.

The investment platform also stated that the average person has had their cash ISA for eight years, but 43% have had it for more than 10 years. Younger people were less likely to have checked their rates recently – 38% in the past year for those between the ages of 18 and 34 – compared to 64% of those over 55.

AJ Bell head of personal finance, Laura Suter, suggested that rising interest rates and the cost of living crisis have prompted more people to check the interest rate they are getting on their cash ISA savings.

“Our research shows that half of people with a cash ISA have checked the rate they’re getting in the past year, compared to just a third of people a year ago,” she commented. “When the research was carried out in 2021 13% of people said it was between six and 10 years since they’d checked their interest rate, but the most recent data shows that has now dropped to just 2%.

“With bills and food costs soaring people want to maximise the return they’re getting on their cash, prompting them to check what interest rate they’re actually getting. What’s more, the Bank of England has increased the base rate twice in the past few months, meaning that savings rates have nudged up – providing a timely reminder for people to check their savings aren’t earning zero.”

She added: “The general rule of thumb is that if you’ve had your cash ISA for more than a year you can probably get a better rate elsewhere. This is because providers often offer an initial high rate or bonus rate than expires after 12 months. But this is more true than ever this year, as Bank of England rate hikes have pushed cash ISA interest rates up, meaning that most people can probably make their ISA savings work harder for them.

“Of course rates are still low and inflation is high and creeping higher, meaning that no cash account is going to keep pace with the rising cost of living. More people might be able to benefit from investing their money rather than keeping it in cash, if they don’t need to get their hands on the money soon.”

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