Savers holding Cash ISAs have been warned to act quickly, as interest rates are predicted to drop following the Bank of England’s base rate decision on May 8th.
After reaching a six-month high in April, these rates could soon decline, impacting returns for savers.
The warning arrives amid growing speculation that the Bank of England will lower its base rate, which could lead to a reduction in the interest rates offered on Cash ISAs.
This shift is coupled with concerns about potential changes to the Cash ISA scheme itself, with government reforms under discussion for the upcoming autumn budget.
Interest Rates Reach a Six-Month High
As of April 2025, Cash ISAs are offering interest rates of up to nearly 5%, with some accounts providing even better introductory rates, according to experts at Investing Insiders. These high rates have offered savers a sense of security in an uncertain financial environment.
However, the interest rates tied to these accounts are typically variable, meaning they could fluctuate based on the Bank of England’s policy decisions. This means that savers with Cash ISAs should consider acting before any rate cuts materialise.
“With Cash ISAs currently offering up to nearly 5% in interest on deposits and some offering even more with introductory rates, savers can gain peace of mind over the returns they will receive and some great rates.” said Antonia Medlicott, founder and managing director of Investing Insiders.
Fixed-rate accounts, while typically offering higher stability, require locking away savings for set periods and are not immune to shifts in the base rate either.
The current top rates are found in fixed-rate accounts, with Charter Savings Bank offering 4.27% on a one-year term, and Progressive Building Society providing 4.3% for two years.
Ford Money and Close Brothers are also offering competitive rates for three- and five-year terms, respectively, with rates ranging from 4.2% to 4.3%.
However, savers must meet minimum deposit requirements, with Ford Money requiring £10,000 to access its best rates.
Potential Reforms on the Horizon
While Cash ISA interest rates are currently holding strong, the upcoming changes to the Bank of England‘s base rate may only be part of a larger shift in the ISA landscape.
Rumours are circulating that Chancellor Rachel Reeves may propose significant changes to Cash ISAs in the upcoming autumn budget.
One of the most speculated changes involves a reduction in the annual allowance for Cash ISAs. Currently set at £20,000, it is suggested that this limit could be slashed to as low as £4,000.
This move would significantly impact savers’ ability to invest in ISAs with tax-free interest, dividends, and capital gains.
No official announcements have yet been made, but all eyes are on the Chancellor, with the autumn budget fast approaching.
