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ISA ‘best buy’ Interest Rate drops below 3%

Another blow has been dealt to UK savers as the ISA interest rate has fallen below 3pc for the first time since the accounts were launched in 1999.

Coventry Building Society dropped their interest rate from 3.1pc to 2.8pc, meaning there are now no ISA’s on the market that will pay over the 3pc mark in interest. This comes at a time when people are being constantly urged to try and save, while they will feel they are not being offered worthwhile returns. On top of this the next best ISA, from M&S Bank which pays 2.75pcwill be pulled on Monday.

Much of the blame has been placed on the Government and the launch of their controversial Funding for Lending scheme in 2012. It is thought that this scheme, which allowed banks to lend at a much lower interest rate than previously, has decreased the pressure on them to attract savers.

This has meant that banks have decreased their savings interest rates across the board, and the final two ISA’s to beat inflation, from Coventry Building Society and M&S Bank, have now been downgraded or withdrawn.

One option for savers who are seeking higher interest rates is to switch to a Stocks and Shares ISA. These are savings accounts where the money deposited is invested by the Bank or Building Society into their chosen industries’ within Stocks and Shares. While these accounts are considered as higher risk, and technically it is possible to get back less than you put in if the fund performs particularly badly, Stocks and Shares ISA’s have consistently outperformed their cash equivalents since their introduction.

If you would like more information about your ISA, or are considering opening a savings account and would like help with your options, simply enter your question into the box above.

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