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Savings rates rise as ISA battle begins
The average interest rate on the top cash ISAs has risen to 3.03% compared to 2.83% this time last year.
by Victoria Bischoff on Feb 07, 2012 at 12:33
ISA interest rates have increased by 7% since last year, new figures show.
The average interest rate of the top five cash ISAs is currently 3.03% compared to 2.83% in February 2011, according to price comparison website Moneysupermarket.
Meanwhile, as providers begin their annual battle for deposits from savers yet to use this year's ISA allowance, we're also beginning to see a number of new, competitive cash ISAs make their way onto the market.
Cheshire Building Society’s new cash ISA offering 3.06%, for example, took over as market leader just last week.
| Lender | ISA account | Minimum Deposit | Rate (AER) | Bonus Rate | Bonus Duration |
|---|---|---|---|---|---|
| Cheshire BS | Direct Cash ISA (Issue 1) | £1,000 | 3.06% | 2.06% | 30/09/2013 |
| Newcastle BS | Bonus ISA (Issue 2) | £1 | 3.05% | 0.95% | 12 months |
| The AA | Internet Access ISA (Issue 2) | £500 | 3.05% | 1.35% | 12 months |
| ING Direct | Cash ISA | £1 | 3.00% | 1.96% | 12 months |
| Teachers BS | Cash ISA Reward | £100 | 3.00% | 1.25% | 12 months |
| Market Harborough BS | 2011 Brighter ISA | £5,340 | 3.00% | 0.75% | 12 months |
However, it's important to be aware that all of the top cash ISA deals include a bonus rate. This means that when the bonus rate is withdrawn – usually after 12 months – your rate will plummet and you will therefore need to be sure to switch your funds to another competitive deal.
What's more, you should take note that the battle for savers' deposits has only just started and providers generally hold their best rates back until nearer the 5 April deadline.
Remember, if you miss the deadline you will lose your £5,340 tax-free allowance for 2011/2012 and any contribution to your ISA will count towards next year's limit.
If you're unsure how exactly an ISA works and want to find out more check out our beginners' guide on The Lolly.
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2 comments so far. Why not have your say?
Barnaby Balkwill
Feb 07, 2012 at 12:47
Still hardly competitve given the current rate of inflation. Banks need to lower borrowing rates and increase savings rates in order to boost the economy.
report thisMatthew Charles Flinders
Feb 07, 2012 at 15:54
I thought the whole point of the BoE keeping the interest rate low was to get people spending and not saving?
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