ISA deposits reach highest point on record in April

Savers placed an additional £14 billion into tax-efficient accounts.

April saw net household deposits into ISAs skyrocket by an additional £14 billion, as shown by the Bank of England’s recent Money and Credit report. Not only is this up from the £4.2 billion increase recorded in March, these figures also surpass last year’s results (April 2024) when ISA deposits reached £11.7 billion.

In fact, this latest surge marks the highest amount placed into tax-free accounts since the Bank of England began this series of reports in April 1999 – resulting in a monumental record high in over 26 years.

Despite this, however, overall deposits for the month rose by only £3.0 billion, largely due to withdrawals of £11.5 billion from interest-bearing sight accounts.

“The level of withdrawals from easy access savings seems to indicate a significant proportion of ISA savings has come from people withdrawing from savings and ploughing the money into their ISA equivalents,” commented Mark Hicks, Head of Active Savings at Hargreaves Lansdown.

What’s behind the ISA spike?

With many savers rushing to make the most of their allowance ahead of the tax-year ending on 5 April, ISA season likely played a significant role in the increase in ISA deposits.

However, with this only accounting for the start of the month, Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, believes “concerns surrounding the rumours of cutting the cash ISA allowance” could also be responsible for the drive in deposits.

Indeed, while Chancellor Rachel Reeves has since confirmed that the annual ISA allowance will remain at £20,000, speculations of major cash ISA restructuring persist, and may have pressured savers to make deposits sooner than they otherwise would.

Adding fuel to the fire, frozen income tax bands continue to see an increasing number of savers dragged into higher thresholds each year, resulting in their Personal Savings Allowance (PSA) being cut and further incentivising the move to a tax-efficient option.

“Cash ISAs will no doubt be popular moving forward as millions of people are expected to pay higher-rate tax at 40% this tax-year, which will see their £1,000 Personal Savings Allowance (PSA) effectively halve to £500 as a result,” Springall explained.

It’s important for these savers to review their accounts to ensure they get the most out of their investments, especially if they now expect their earnings to breach their PSA. While ISAs tend to pay less than their savings counterparts, providing a tax-wrapper for your cash could still prove more effective.

Slump in mortgage demand

Although ISAs appeared to flourish, the mortgage market unfortunately didn’t see the same level of growth.

Instead, net mortgage borrowing by individuals plummeted by £13.7 billion to -£0.8 billion in April. This is turn brought gross lending crashing down to £16.9 billion for the month, falling from £39.9 billion previously seen in March – the largest drop since June 2021.

What’s more, net mortgage approvals, which serve as an indicator of future borrowing, fell for the fourth consecutive month in April to 60,500.

March itself had seen a flurry of activity as buyers raced to beat the Stamp Duty Relief deadline before thresholds dropped on 1 April, meaning a slump was likely in the immediate aftermath as demand inevitably dwindled.

Nevertheless, recent rate cuts could now encourage those who missed out on the relief as well as other prospective borrowers to seek out a new deal; though with growing uncertainty over whether prices will continue to drop, they may need to move quickly to take advantage.