Average cash Isa rates have fallen to just 1.43 per cent as providers continue to steer away from new tax-free offerings, Bank of England data has found.
In August 2012, the average was 2.79 per cent while in 2013 it was 2.37 per cent, highlighting just how far cash Isa rates have fallen.
In fact, savers are suffering the lowest-ever interest rates for their cash, more than eight years after the financial crisis began.
The average payout on fixed-rate bonds and ISAs, which tie up money for between one and five years, is the worst since records began in 1999 and less than half the 3.28 per cent of February 2009.
Easy access accounts are also close to all-time lows, giving back an average 0.77 per cent, according to the Bank of England.
Analysts believe there is little chance of an imminent rise in the Bank rate, which at 0.5 per cent is the lowest ever, so savings rates will remain low.
Savers who also have a mortgage are likely to benefit from low borrowing costs though for the same reason, with rates for home loans currently at historically low levels.
However, for those without a mortgage, matters were made worse by the government’s £80billion Funding for Lending Scheme. Brought in during August 2012, banks were given billions in cheap loans if they boosted lending to households and firms.
The flow of cash meant banks were less reliant on taking in savings and paid less competitive rates.
Two weeks ago, 400,000 savers who held Isas with government-backed National Savings and Investments (NS&I) were told their rates would be cut from 16 November.
NS&I will cut the rate on its tax-free Isa account to 1.25 per cent from 1.5 per cent.
Notice accounts tend to pay higher interest rates as savers must wait for an agreed amount of time before withdrawing money from the account, but rates on these deals have been falling too.
Many banks and building societies are competing for customers by offering better interest rates or incentives on current accounts, rather than savings accounts.
