ISA deposits in February reach highest level in five months

ISAs continue to be popular among savers with just a few days left until the new tax-year starts.

Savers deposited an extra £3.6 billion into cash ISAs in February , according to the latest Money and Credit release from the Bank of England. This is up from £3.2 billion in January .

February’s figure marks the highest sum deposited into cash ISAs in a single month since September 2024, when a total of £3.9 billion was added to these tax-free accounts.

Even though deposits into ISAs remain at a healthy level, the total amount deposited into savings in February dropped to £4.3 billion, compared to £8.4 billion in the previous month. With contributions to ISAs making up more than 83% of February’s total savings deposits, savers seem to be taking the opportunity to use up their remaining ISA allowance before the end of the tax-year on 5 April.

“Cash ISA deposits reigned supreme in February, which is understandable to see as the end of the tax-year edges closer. More savers will be turning to cash ISAs to protect their hard-earned cash from tax, so these will remain a popular choice in 2025,” commented Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

The ISA appeal

As well as savers wanting to protect their hard-earned savings from income tax, they may also be opting for ISAs over standard savings accounts because of their competitive interest rates.

Easy access cash ISAs pay particularly attractive rates and have offered comparable or higher returns than standard easy access savings accounts for several months.

As of 31 March, the top easy access cash ISAs pay above 5.36% AER while the top easy access savings accounts pay above 4.75% AER (excluding accounts with a fee). This means many savers may be choosing to save in an ISA for the higher return they could get on their money, even if they’re not at risk of being taxed on their savings.

“Over the past week alone, providers have been working hard to improve rates to entice new business, and it’s not too late for savers to take advantage,” Springall observed.

Another reason for February’s uptick in ISA deposits may be the rumours that swirled about the possible review into cash ISAs in last week’s Spring Statement.

Although the Chancellor of the Exchequer, Rachel Reeves, didn’t announce any immediate ISA changes in the Spring Statement, earlier concerns that the £20,000 ISA allowance would be cut may have prompted some savers to boost their ISA deposits.

Mortgage market cools

While the ISA market remains competitive and dynamic as we approach the end of the tax-year, the mortgage market seems to have cooled as net mortgage borrowing fell by £0.9 billion in February.

Similarly, after falling by 400 in January, the number of net mortgage approvals dropped by another 600 in February to stand at 65,500.

Remortgaging also saw a significant change as the number of approvals with a different lender fell by 800 to 32,000 after increasing by 2,100 in January.

“Post-holiday blues settled over the mortgage market in February. Buyers were increasingly convinced they’d missed the opportunity to take advantage of the stamp duty holiday, so mortgage approvals fell for the second consecutive month,” explained Sarah Coles, Head of Personal Finance at Hargreaves Lansdown.

But there is still some positive news for potential borrowers as, even though Springall recognises that fixed mortgage rates have been relatively volatile over the past month, she points out that “reductions have generally outweighed increases, which could encourage mortgage transactions”.

Furthermore, even though the end of the stamp duty land tax (SDLT) relief may be “a slight hurdle for would-be buyers who have not got enough savings put aside”, Springall notes that “several lenders have been adding lucrative cashback incentives to deals to support borrowers who miss the SDLT relief deadline”.