Santander hikes Isa rates

Santander hikes Isa rates

Santander UK has increased the interest rate on its two-year fixed rate Isa products.

For existing 123 World and Select customers the rate rose to 1.9 per cent, and 1.3 per cent for non-123 World and Select customers. 

For the e-Isa product, existing 123 World and Select customers can access a rate of 1.5 per cent, while a rate of 1.1 per cent is offered to non-123 World and Select customers. 

The move follows research that suggested 40 per cent of people were considering saving in a cash Isa in the 2019/20 tax year. 

Rising interest rates were cited as the main reason for the surge in interest.

But the research, which was conducted among 2,013 UK adults in February, also highlighted a lack of understanding about the savings vehicles. 

Almost half of respondents didn’t know that Cash Isas allow them to save money without paying tax on the interest they receive and 65 per cent were unaware they could save up to £20,000 in a single tax year.

Meanwhile, 64 per cent mistakenly believed they had to tie their money up for a period of time in an Isa.

Hetal Parmar, head of banking and savings at Santander, said: "It’s encouraging to see so many people are considering putting their money into Isas this year and our improved interest rates will give an added boost to customers looking for a competitive return."

Martin Bamford, chartered financial planner at Informed Choice, added: "With price inflation falling below average wage inflation, and the prospect of rising interest rates in the future, more savers are likely to appear in the coming years. 

"It’s positive to see Santander boosting interest rates to make their cash Isa product more competitive.

"Savers should always shop around to take advantage of the best rates. It’s also important to make a note in your calendar to check rates again after 12 months, as the price of inertia can be quite high."