Cash ISA rates are rising – average hits 14-m high

Cash ISA rates haven't had a great time of it in recent years, what with the Personal Savings Allowance (PSA) decimating the market and last summer's base rate cut only adding to the sector's woes. So it'll come as welcome news that rates have been gradually edging up recently, with our latest data showing that the average cash ISA rate has now hit 1% for the first time in 14 months!

Cash ISAs on the rise

The figures show that the average cash ISA rate – including both variable and fixed rate cash ISAs – now stands at 1.00%, an increase of 0.02% in the last week alone and the highest it's been since August 2016. This was the month of the base rate cut, so while the average stood at 1.10% in the first week of August 2016, it had fallen to 1.01% by the end, and continued falling in the months after before hitting a low of 0.81% in January this year.

Happily, the tide has been turning recently, with several providers boosting their rates and adding to their ISA range, which means average rates have been edging up. The fact that the average has now hit 1% is a definite milestone, and savers can benefit!

Get the best ISA rates

There have been several high-profile launches in the last few weeks alone, including some market-leading fixed rate ISAs from Yorkshire and Clydesdale Banks. For example, the Cash ISA – Fixed Rate Bond (Issue 42) pays a rate of 1.50% that's fixed until January 2019, while Issue 43 pays 2.20%, and savers need only lock their money away for a little over three years.

You can even secure a rate of 1.30% from Charter Savings Bank without needing to tie up your cash, although you will need to give 95 days' notice to access your funds or be willing to forgo the same amount of interest. Find more options by checking out our variable cash ISA and fixed ISA Best Buys, or using our savings search tool.

Should I still invest in an ISA?

The latest uptick comes despite recent figures hinting at the continued demise of the sector, with investments to cash ISAs plummeting as savers move away from these once-loved accounts. So, are they still worth considering?

We discuss this question in more detail here, but in a nutshell, it's probably still worth keeping at least a portion of your savings squirrelled away in these tax-free accounts, particularly if you're thinking long-term. If you manage to save a decent sum over the years, the amount of interest you earn could easily breach the annual £1,000 PSA tax-free limit, particularly if rates rise, and remember that PSA rules could change at any time.

And that's before we even get to the recent rate increases. It's true that non-ISA deals continue to pay better rates, but the latest launches mean that the gap is starting to close; the top rate for a four-year cash ISA currently stands at 2.30% (from BLME), but Clydesdale and Yorkshire Banks' long-term cash ISA isn't far behind at 2.20%, and you don't need to lock your money away for as long. This means cash ISAs should still be considered, and hopefully the recent run of rate increases will continue.

What next?

Compare the best cash ISA rates to find the ideal tax-free home for your cash.

Want the potential for even better returns? Stocks & shares ISAs could be worth considering, provided you're comfortable with the extra risk involved. 

Use our savings search tool to find the best deal for your needs.