Bank boosts interest on Cash ISA to 4.21% and earns 'excellent' rating

Castle Trust Bank has increased the interest on its five-year fixed Cash ISA, earning an "excellent" Moneyfactscompare rating. The new deal, which offers 4.21% AER fixed for five years, has pushed the account into the top table, according to a savings expert.

People can launch the account with a minimum deposit of £1,000, and interest is paid on maturity. Based on this deposit and interest rate, the account can earn an estimated £228.99 when the term matures in five years' time. Commenting on the deal, Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk, said: "This week, Castle Trust Bank has increased the rate on the five-year option of its Fixed Rate e-Cash ISA. The account now pays 4.21% AER, which sees it enter the top tables, and could appeal to savers looking to make the most of their tax-free pots over the long-term."

Withdrawals from the account are only permitted on closure and will be subject to a "substantial" 360-day loss of interest. Due to this, Ms Eastell urged savers to carefully consider accessing their savings, as it could result in a penalty.

Ms Eastell continued: "In more positive news, further additions are permitted for 14 days from the account opening, but it is crucial that savers fund their account with a minimum of £1,000 within this period. Otherwise, no interest payment will be made, and their money will be refunded.

"On assessment, the account secures an Excellent Moneyfacts product rating."

To launch the account, savers must be 18 and over, a UK resident, have a national insurance number, and have a valid UK mobile number and email address. They also must have a UK-based current account.

Deposits with Castle Trust Bank are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK's deposit guarantee scheme.

Cash ISAs have risen in popularity in recent years due to frozen tax-free savings thresholds and increased interest rates. With a Cash ISA, people can save up to £20,000 a year tax-free.

Fixed rate accounts have also become more appealing in recent months. Savings providers started reducing interest rates last summer after the Bank of England made its first cut to the base rate since 2021, and the trend has continued ever since.

Interest rates peaked in the summer of 2023, with some providers offering returns of over 6%, but they are now averaging around 3.47%, according to new data from Moneyfacts.

How does the account compare?

Shawbrook Bank is currently topping the table for five-year fixed Cash ISAs with an interest rate of 4.25% AER.

Savers can launch the account with a minimum deposit of £1,000, and interest is paid on the anniversary. Savers should carefully consider withdrawals, as earlier access is subject to a 360-day loss of interest.

UBL UK places just behind with an interest rate of 4.22% AER. The account can be opened with a minimum deposit of £2,000, and interest is paid on maturity. Earlier access is only permitted on closure and will be subject to a 365-day loss of interest.

Ms Eastell said: "With inflation running higher than the interest savings earn, money left languishing in a low-interest account is losing its spending power - making it tougher to achieve a sense of financial resilience or save towards goals such as a car, house or comfortable retirement.

"This comes hot on the heels of the latest base rate reduction, which had an almost instantaneous effect, with over a dozen savings account providers cutting variable rates within 24 hours and many more likely to tumble in the coming weeks.

"It is crucial savers review their current deal and if they are earning less than 3.8% to immediately search for a better deal."