The data firm, Moneyfacts, has published research showing that the average long-term rate for ISAs held in cash accounts moved above the one per cent mark in January. This follows increases to 0.98 per cent in November and 0.99 per cent in December.
This was the first time since 2015 that the average rate has increased in consecutive months, but it is still well below the average rate in January 2016 of 1.88 per cent – a fall which some experts have attributed to the introduction of a £1,000 tax-free allowance on interest earned from savings in April 2016.
A key driver of this increase is thought to be providers looking to entice savers to invest any remaining ISA allowance before the end of the tax year in April.
The best rate available in January 2017 was a two-year ISA with Aldermore Bank at 1.2 per cent. This compares with a two per cent rate available on a two-year ISA from the State Bank of India in January 2016.
Charlotte Nelson of Moneyfacts said: “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.”