Cash Isa rates have improved considerably as the start of a new tax year approaches, according to a financial information website.
The average easy access Isa on the market pays around seven times the interest rate offered a year ago, at 1.85% this month compared with 0.26% in February 2022, Moneyfacts.co.uk found.
Savers looking for this type of product can get a rate as high as 3.05%, from Newcastle Building Society, according to the analysis by Moneyfacts of products offered on February 6 2023.
A year ago, the top rate for an easy access Isa was 0.61%, being offered by Shawbrook Bank.
Savers looking for a one-year fixed-rate Isa can now get a deal at 4.25% from Virgin Money. In February 2022, the top rate for a one-year fixed-rate Isa was 1.00%, being offered by Coventry Building Society.
Savings rates generally have been improving following a string of Bank of England base rate hikes over the past year.
The average five-year fixed rate-Isa on the market pays 3.68% interest, up from 1.40% a year ago, with rates as high as 4.46% currently available, Moneyfacts found.
Moneyfacts based all its calculations on someone having £10,000 to put away. Higher rates may potentially be available for people with a bigger savings pot.
While savings rates have improved, they may only partially offset the eroding impacts of inflation on the real value of savings pots, with consumer prices index (CPI) inflation running at 10.5% in December.
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “Savers have just a couple of months left until the new tax-year begins (on April 6), so time is ticking for them to utilise their current Isa allowance.
“Thankfully, the run-up to Isa season is looking bright as rates are much more favourable than they were a year ago.
“Those savers who locked into a top one-year fixed rate Isa a year ago will find the equivalent top deal pays more than four times the amount of interest.
“Consumers who prefer a longer-term fixed Isa will be pleased to see much higher rates when they come off their current deal this year.”
In recent years, Isa seasons have been lacklustre as the base rate has been held at low levels.
But the recent rises in the base rate will add to the financial squeeze felt by some borrowers, who are seeing their costs increase.
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