Inflation Falls To 2.0% | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 18/08/2021

Inflation has fallen unexpectedly to 2.0% during July, down from 2.5% the previous month, but although today’s figures will be welcomed by many savers, the market remains challenging especially as experts believe inflation will rise again over the coming months.

Despite the fall in inflation, which is measured by the Consumer Price Index (CPI), our research has found that no savings account or ISA can currently match or beat the inflation rate of 2.0%. As well as this, the predicted rate of inflation is expected to reach 3.3%, which means many savers will likely struggle to find any savings accounts that will be able to keep up with the rate of inflation over the coming months.

“There has been a notable uplift to market-leading savings rates on offer since last month across various types of accounts and terms, which is positive to see,” explained Rachel Springall, finance expert at Moneyfacts.co.uk. “However, inflation is eating its way into savers’ hard-earned cash and with the expectation for it to rise, its eroding power will not be easing any time soon. Savers would be wise to not let this deter them from finding a more attractive rate, as deals are improving, and they may miss out on a market-leading rate if they become apathetic.

“Due to the uncertainty the pandemic caused, savers may well wish to keep their cash close to hand, such as with an easy access account. Thankfully, rates are slowly improving in this sector and the top rate today comes from Tandem Bank at 0.65%, which increased its rate last week by 0.25% and is now one of the highest easy access rates seen since the start of the year. Not only is this a market-leader for new customers, but it also supports Tandem Bank’s green lending objectives – so savers will get a decent return and be supporting ethical initiatives in the process. As a comparison, most of the high-street banks pay as little as 0.01% on easy access accounts at present, so clearly savers would be wise to consider alternative brands.”

She added: “To mitigate the impact of inflation, switching accounts for a more attractive return is essential and considering the more unfamiliar brands would be wise as they continue to inject competition across the savings spectrum. Signing up to rate alerts and newsletters to keep abreast of the changing top rate tables is a good idea, as savers may need to act swiftly to take advantage.”

Alternative to savings accounts?

For savers looking for an alternative to traditional savings accounts, investing could be an option. Investing is generally only suited to those looking to save in the long-term, for example five years or more, but can be a good option for long-term savers as there is the potential to earn an inflation-beating return on their investment. Saying this, those considering investing should be aware that there is the possibility they will not make any returns on their investments and, in some cases, investing could result in them losing all their money, including their initial capital. The risky nature of investing means that consumers should carefully research the market before making investments and consider speaking to an independent financial advisor first to ensure it is the right option for them. For more information about investing and the types of investments available, visit our investment page.

How to get free financial advice

Moneyfacts.co.uk readers with a minimum of £100,000 in savings and investments can get a free one-hour consultation about their saving and investment options with the award-winning, independent advisers Kellands Hale. Click here for more information or to book your free consultation.

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