Banks are struggling to cope with requests from customers to transfer their cash ISAs to different providers, a peer-to-peer lender claims.
Property lender Sourced Capital said it has been told by a big bank that transfers were taking a while and requested no calls for updates due to a “substantial backlog.”
It comes as ISA season gears up and P2P lenders hope to attract investors from low-yielding cash ISAs to their Innovative Finance ISAs (IFISAs) as well as those who may want to diversify some of the funds they have in their stocks and shares ISAs.
Read more: IFISA inflows set to hit £1bn milestone
Stephen Moss, managing director of Sourced Capital, said cash ISA subscriptions have been declining each year due to the poor rates on offer, with the number of accounts declining 8.2 per cent annually in 2019 and 16.1 per cent in 2018.
“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,” Moss said.
“However, it hasn’t been great for those attempting to accumulate a sizeable 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.”
Read more: Assetz hits £100m IFISA milestone