Interest rates may have been at a record low for almost two years now, but savers were cheered this week with the news that the average interest rates on Individual Savings Accounts (ISAs) have hit a two year high.
Banks and building societies are engaged in a fierce war to attract new savers ahead of the end of the tax year and this has resulted in increased savings rates for consumers.
ISA interest rates up nearly 0.25% on last year
The Financial Times reports that the average interest rate on Individual Savings Accounts (ISAs) has risen to 2.27 per cent. This includes both variable and fixed-rate ISAs, and compares with an average interest rate of 2.05 per cent in January 2010.
The last time that ISA rates were at this level was in January 2009 when rates averaged 2.58 per cent, although this was before the base rate was reduced to its current level of 0.5 per cent.
The FT also reports that ‘ISA returns of over 2 per cent – which are tax-free – also compare well with the current average of less than 1 per cent paid on conventional instant access accounts.’
ISA season has started early in 2011
With a number of new ISA products already being launched to the market, experts believe that the traditional ISA season has begun early this year.
The newspaper reports that the highest-paying instant–access ISA is currently Nationwide’s e-ISA, which offers 2.9 per cent including a 1.15 percentage point bonus until August 2012.
If you are looking for a guaranteed return, the highest fixed-rate ISAs currently pay 3.1 per cent over one year, or over 4 per cent for longer-term deals.
Experts also believe that rates may continue to improve over coming weeks, with banks and building societies engaging in a push for deposits before the current ISA year ends on 5th April.
