Virgin Money has raised the interest rate on its fixed Cash ISA to 4.46%, earning an “excellent” rating from Moneyfactscompare.
Savers can open an account with just £1, with the rate fixed until December 24, 2025, and interest paid annually.
Fixed-rate Cash ISAs have gained popularity amid high interest rates and fixed tax allowances. These accounts allow UK residents to save or invest up to £20,000 tax-free per tax year, with the limit for 2024/25 set at £20,000.
However, following the Bank of England’s second Base Rate cut this year to 4.75%, savings rates are less lucrative than before. This has made fixed-rate accounts more appealing, as they let savers secure their interest rate for a set term.
With average one-year fixed ISA rates now at 4.06% according to Moneyfactscompare, Virgin Money’s offer stands out as a competitive option for those seeking higher returns.
Commenting on Virgin Money’s deal, Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk, said: “Alongside changing the issue number, Virgin Money has increased the rate on its one-year Fixed Rate Cash E-ISA.
“The deal pays a rate of 4.46% yearly and has a monthly interest option. It may appeal to savers who want to utilise their ISA allowance, but they must be comfortable with locking their cash away for a year.
“Although earlier access can be granted it is subject to a 60-day loss of interest penalty. The account can be set up with as little as £1.”
She added: “Overall, this deal earns an Excellent Moneyfacts product rating.”
While Virgin Money may be offering a more competitive deal, it isn’t currently taking the top spot for one-year fixed rate Cash ISAs.
Shawbrook Bank’s One Year Fixed Rate Cash ISA Bond (Issue 111) offers an Annual Equivalent Rate (AER) of 4.49%.
Savers need a slightly larger opening deposit of £1,000 to launch the account and interest is paid on maturity. Earlier access can also be granted but it will be subject to a 90 day loss’ of interest.
Commenting on the market, Rachel Springall, finance expert at Moneyfacts, said: “Fixed rates have been on the downward trend and, as a result of providers adjusting their rates or indeed market positions, the average shelf-life of a fixed rate bond fell to 35 days month-on-month, its lowest point since the start of March this year.
“This emphasises the necessity for savers to move quickly if they want to secure a lucrative guaranteed return on their cash.”
