The new ISA offering from the financial services institution aids its ability to secure a position at both the first and joint-second positions in the best buy tables for fixed one-year ISAs.
In addition to the new offering, Northern Rock also offers a 3 per cent tax free ISA; however that savings product does not permit savers to carry over allowances from the previous year.
Competitor Marks & Spencer also offers a 3 per cent interest rate on any account with a minimum balance of £100. As the minimum on the Northern Rock ISA is £500, many savers may opt for the Marks & Spencer offering instead.
However even a 3.05 per cent rate is insufficient to cover the nation’s inflation rate; the Consumer Price Index has been holding steady at 3.1 per cent for several months now. What this means is that any cash savers deposit into products with an interest rate lower than the CPI means in the long run their savings will become eroded by rising living costs.
For a cash ISA to beat the inflation rate, savers need to find one with a longer term; Santander, BM Savings, and Chelsea Building Society all have ISA products that offer a rate of 3.25 per cent over a fixed two year period. Three-year fixed rates fare even better, especially for the over-50 crowd, as Saga offers a 3.75 per cent rate to that particular class of savers.