Glimmer of hope in the ISA market | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

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Published: 16/01/2017

It can't be denied that 2016 was a pretty shocking year for cash ISAs, but happily, the start of the New Year has brought with it a glimmer of hope for the sector, with our latest report revealing a slight uptick in average rate for the second month running.

Our figures, shown in the table below, reveal that the average long-term fixed ISA rate has risen by 0.01% this month to stand at 1.00%, following the same increase the month before, thereby bringing the average out of record low territory.

  Jan-16 Nov-16 Dec-16 Jan-17
Total number of live ISA products 329 273 281 293
Average long-term fixed rate ISA 1.88% 0.98% 0.99% 1.00%

Granted, it isn't a huge increase, but in the current climate, anything is better than nothing! Not only that, but it's the first time the sector has seen a consecutive increase in rate since 2015, and although the average has still fallen by 0.88% in the last year, the latest boost is nonetheless welcome.

"January has seen a few green shoots starting to sprout in the savings market, particularly in the ISA sector, which saw the average long-term ISA rate rise to 1.00%, the first time it has reached 1.00% or higher since October 2016," said Charlotte Nelson, finance expert at Moneyfacts.

"The number of ISA deals on the market has also increased from November's low. While the increases both to the overall product number and the long-term ISA average are small, this is the first time Moneyfacts has seen consecutive rises since the last quarter of 2015."

So just why are we seeing some green shoots of positivity? Well, as Charlotte explains, the start of the year is typically when providers start to look ahead to the ISA season. They're preparing their offerings in advance to target savers who are early to the party – or those who want to make the most of their annual allowance before it's too late – which could explain the recent boost to long-term ISA rates.

However, it's still early days. "The positive increase to the average long-term fixed ISA rate will hardly see savers rejoicing in the streets, particularly as low rates are still rampant across the savings markets," said Charlotte. "Furthermore, the Personal Savings Allowance has left savers questioning whether the ISA's tax-free element is still worth its salt in today's savings world.

"With uncertainty over where the UK now stands in Europe, higher inflation and the Term Funding Scheme, it is likely we will still see supressed rates for some time to come. Given the limited number of challenger banks in the ISA market, it is likely this area is going to struggle, with ISA season predicted to be a non-event yet again."

What next?

The savings market is still lacklustre, even with this latest improvement, so it's vital to find the savings account that makes your money go as far as possible. Check out the top savings rates and ISA Best Buys to get started.


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