Official figures have revealed that the UK's rate of inflation rose to a 20-month high in July, with the Consumer Prices Index (CPI) standing at 0.6%. This marks an increase of 0.1% from June's figure and makes it the highest rate of inflation seen since November 2014, but happily for savers, it remains low in the historical context.
This means that there's little to worry about in terms of savings erosion, with the vast majority (501) of the 727 savings accounts currently on the market able to beat or match inflation. Of these, 462 (59 no notice accounts, 41 notice deals, 199 fixed rate bonds and 163 cash ISAs) are without restrictive criteria and open to everyone, which means there are still plenty of options for those seeking an inflation-beating return.
However, that's where the good news ends, as the rate level paints a far bleaker picture for savers: our latest data shows that rate reductions in the savings market have now outweighed rate rises for 10 consecutive months, with some reductions being particularly marked.
Indeed, Moneyfacts recorded just 16 savings rate rises during July, but rate reductions over the same period completely outshone this figure – the number of decreases totalled a staggering 154, with some deals falling by as much as 1.00%.
Charlotte Nelson, finance expert at Moneyfacts, explains why this could be happening: "The month of July saw many providers prepare for the expected cut to base rate, with savings accounts sent freewheeling ever lower. In fact, for every one rate increase in July, there were 10 rate cuts.
"Savers are now facing a lethal combination of low SWAP rates and an ongoing rate cut war, not to mention the recent announcement that the Bank of England did indeed cut base rate to 0.25%. They're also seeing some of the best deals being withdrawn altogether, with 16 of the top 10 deals pulled from the market in July, which will mean that the punishment of low rates is unlikely to cease for some time."
The result of all this is that savers are facing all-time lows once again. For example, the average two-year fixed rate bond has fallen from 1.78% to 1.22% in just one year, while the average easy access cash ISA rate has fallen by 1.11% to 0.90% over the same period. Not only that, but two years ago the top-paying easy access account offered a rate of 1.50%, while today's saver will need to fix for a whole year to achieve that rate.
All in all, it's not looking good, as Charlotte concludes: "With providers no longer needing savers' funds, the life of the cash saver has just got even harder, so anyone looking to get a decent return on their savings will need to act fast – and soon."
If you're looking for a decent savings rate, don't hang around – check out the top-paying deals, and if you find one you like, snap it up before it's too late!
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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