One-year ISA rate increases to three-year high - Savings - News | moneyfacts.co.uk

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One-year ISA rate increases to three-year high

One-year ISA rate increases to three-year high

Category: Savings
Author: Nigel Woollsey
Date: 22/01/2019

Savers will be pleased at the news that the average rate of a one-year fixed ISA has reached a three-year high of 1.35%. According to the latest Moneyfacts Treasury Report data, which will be published shortly, those looking to invest in the short term will be able to benefit from the best average ISA rates since February 2016 when they stood at 1.41%.



Feb-16


Jul-17


Jan-18


Oct-18


Nov-18


Dec-18


Jan-19

Average one-year fixed ISA rate*


1.41%


0.95%


1.08%


1.30%


1.33%


1.34%


1.35%

Average long-term fixed ISA rate*


1.87%


1.19%


1.43%


1.60%


1.60%


1.62%


1.60%


Difference


0.46%


0.24%


0.35%


0.30%


0.27%


0.28%


0.25%

Source: Moneyfacts Treasury Report
*Based on an investment of £5,000

While the increase could be considered marginal compared to December 2018's figure of 1.34% - equating to a monthly increase of just 0.1% - it should be noted that this growth is part of a continuing trend seen in the average rates since October 2018. It's thought that increased competition among providers is helping to push rates upward at a modest pace.

Previously one-year fixed ISAs seem to have been favoured among savers, allowing them to revisit their investments and look at fresh options at the start of each ISA season. This new insight suggests providers may already be responding to this trend, resulting in the latest uplift.

However, the average long-term fixed ISA rate has not followed the same path, with data showing that the average rate fell in January by 0.02%, down from the previous month's average of 1.62%. Despite this, on an annual basis the long-term ISA rate rose by 0.17%, up from 1.43% recorded in January 2018, however the one-year average ISA rate increased more significantly by 0.27%.

Darren Cook, finance expert at Moneyfacts.co.uk commented: "After the Personal Savings Allowance (PSA) was introduced during 2016, ISA rates decreased significantly. Since then they have typically been lower than those offered by standard fixed rate bonds. Yet with interest rates on ISAs seeming relatively low and with most UK taxpayers able to earn up to £1,000 of income from savings tax-free, savers should still not lose sight that an ISA allowance will be ring-fenced in years to come when interest rates may look a little different to what they do today, and the PSA could fluctuate."

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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