Death of the Cash ISA – Big banks are struggling to cope with the mass Cash ISAodus

The latest market insight and research from peer to peer lending platform, Sourced Capital of the Sourced.co Group, has revealed that a mass exodus of Cash ISA investors submitting transfer out requests from their Cash ISAs is causing a backlog with the big bank lenders.

Sourced Capital was recently advised by HSBC that transfers were taking a while to process and were requesting no calls for updates due to the substantial backlog, yet further indication of the death of the Cash ISA as investors look for more lucrative options.

This is a trend that has been apparent for some time due to record low-interest rates and one that will no doubt be exacerbated with the Bank of England’s decision to keep rates frozen yet again at 0.75%.

In fact, since 2008 the number of accounts subscribed to a Cash ISA has declined every year except one, with the total number down -36.38% all in all, averaging an annual decline of -4.69%.

Some of the biggest annual declines have come over the last year and the year prior to that, with the number of Cash ISA accounts dropping by a notable -8.22% and -16.19% respectively.

Prior to the economic crisis, available rates averaged at 5%, but in more recent times this return has diminished to around 1.45%.

It’s clear that the preference of investing in a Cash ISA is well and truly on the slide and those looking to make their money work harder are opting for alternative investment options like the Innovative Finance ISA.

The IFISA is a category of ISA which was launched in April 2016 for UK taxpayers. Previously, there have been two main types of ISA: Cash ISAs and Stocks and Shares ISAs. Similar to these ISAs, the IFISA allows you to invest money without paying personal income tax. This enables you to invest your money into the growing peer to peer market.

Like cash ISAs Each tax year, you get an allowance of up to £20,000 to put into IFISAs which you can distribute across your different ISAs should you wish to. In addition, you can transfer your previous year’s ISA investments into your IFISA and while your capital is of course, at risk, an IFISA can bring returns of as much as 10-12%.

Founder and Managing Director of Sourced Capital, Stephen Moss, commented:

“A prolonged period of extremely low-interest rates has been great for some and has helped stimulate borrowing and spending activity, most notably across the UK property and mortgage sectors. However, it hasn’t been great for those attempting to accumulate a sizable savings pot with the return on their hard-earned cash remaining really rather poor.

It comes as no surprise then that the declining health of the Cash ISA seen in recent years has now progressed to an almost fatal level as more and more investors remove their cash and look elsewhere for a more favourable return. This exodus has been spurred by more innovative options providing a better return and has become so prevalent that even the biggest lenders are struggling to cope with the paperwork.”

CASH ISA – Number of accounts subscribed in current year (thousands)
Period
Number of accounts subscribed in current year (thousands)
Change / growth (yearly)
2008-09
12,234
x
2009-10
11,426
-6.60%
2010-11
11,859
3.79%
2011-12
11,187
-5.67%
2012-13
11,682
4.42%
2013-14
10,481
-10.28%
2014-15
10,288
-1.84%
2015-16
10,118
-1.65%
2016-17
8,480
-16.19%
2017-18
7,783
-8.22%
Total Growth
-36.38%
Average Annual Growth
-4.69%
CASH ISA – Amounts subscribed (£millions)
Period
Amounts subscribed (£millions)
Change / growth (yearly)
2008-09
£30,383
x
2009-10
£31,437
3.47%
2010-11
£38,197
21.50%
2011-12
£37,222
-2.55%
2012-13
£40,901
9.88%
2013-14
£38,821
-5.09%
2014-15
£60,951
57.01%
2015-16
£58,694
-3.70%
2016-17
£39,191
-33.23%
2017-18
£39,801
1.56%
Total Growth
31.00%
Average Annual Growth
5.43%
CASH ISA – Average subscription per account (£)
Period
Average subscription per account (£)
Change / growth (yearly)
2008-09
£2,483
x
2009-10
£2,751
10.79%
2010-11
£3,221
17.08%
2011-12
£3,327
3.29%
2012-13
£3,501
5.23%
2013-14
£3,704
5.80%
2014-15
£5,924
59.94%
2015-16
£5,801
-2.08%
2016-17
£4,622
-20.32%
2017-18
£5,114
10.64%
Total Growth
105.96%
Average Annual Growth
10.04%

Properganda PR

National and local media coverage for property businesses. Journo quotes delivered in minutes.

You May Also Enjoy

Letting Agent Talk

The pros and cons of renting to students: is it the right choice for you?

Student properties are no different in term of quality and facilities than any other type of private rental. And although landlords may have to spend a fair amount on setting up and properly maintaining student lets, they can also charge a good market rent. To help you decide whether letting to students might be worthwhile…
Read More
Finance

Autumn Budget Misses Mark on Housing Reform: UK Rental Market Squeezed by Shortages and Rising Rents

The UK rental market faces mounting pressures, with a recent Rics survey revealing a critical shortage of properties and surging rent prices. Landlord instructions, a key indicator of properties available to rent, fell to a net balance of -29%, marking this the lowest level since 2021. Strong tenant demand is driving rents higher, with 33%…
Read More
Estate Agent Talk

Save a house deposit faster than ever in THESE areas!

Save a house deposit faster than ever in THESE areas! Aberdeen City in Scotland is named the best place to live if you want to save for a house deposit fast, saving in as little as a year and a half Inverclyde is second, whilst Burnley is third Average salaries and house prices in each…
Read More
Estate Agent Talk

Finding Your Dream Home: Expert Advice from Camberley’s Top Estate Agents

Finding the right estate agent is crucial when navigating the competitive housing market in Camberley. With local expertise and in-depth market knowledge, these professionals can guide you toward your ideal property, saving you time and effort. Their understanding of the area’s nuances, from property trends to community relationships, positions them as indispensable allies in your…
Read More
Breaking News

Zoopla reveals most affordable towns in Britain

With the average home valued at nearly four times average household incomes, Zoopla reveals the most affordable towns in Britain   An average property in Britain is valued at 3.8 times the average annual household income (assuming 2 full-time workers) Cumnock in Scotland, is Britain’s most affordable town to buy in 2024 with average property…
Read More
Software & Tech

The Evolving Nature of Real Estate and Strategies for Agency Success

Real estate agents are used to working with fluid market dynamics. Adapting their sales strategies and responding to new industry demands is almost second nature to most agencies today. However, while making the necessary adjustments when following housing market trends is important, it’s also important for agencies to consider new business innovations that become available…
Read More