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Inflation stays put, but savings cuts continue

Inflation stays put, but savings cuts continue

Category: Mortgages

Updated: 14/06/2016
First Published: 14/06/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Figures from the Office for National Statistics (ONS) show that inflation remained at 0.3% in May, unchanged from April, and marking the fifth month of the year so far that the measure of CPI has been at this level.

Happily for savers, this means that the value of their savings pot won't be greatly impacted by inflation and its erosive effects – indeed, the vast majority (660) of the 815 savings accounts on the market can match or beat inflation – but in not so welcome news, their funds may instead be at the mercy of falling interest rates.

Savings cuts hit ISAs hard

Our latest figures show that rate reductions in the savings market have now outweighed rate rises for eight consecutive months: we recorded just 18 savings rate rises in May, but rate reductions over the same period completely outshone this figure and stood at a staggering 156, with some deals falling by as much as 2.00%.

Unfortunately, some of the most disappointing cuts affected Help to Buy: ISAs. The maximum rate on offer now stands at 3.00%, a far cry from the top rate of 4.00% available when these accounts were first launched – as Moneyfacts' finance expert Charlotte Nelson points out, even this savings initiative "has failed to deal with savers' main problem: never ending rate reductions".

The rate cuts haven't stopped there, either. The ISA sector as a whole has been greatly impacted by falling rates, as just one month after this year's dismal ISA season, 30% of this month's rate reductions have fallen on these once much-loved accounts. Savers will be even more disappeared to hear that the average easy access ISA rate has fallen by 0.11% in six months to stand at just 0.98%, which is the first time on record that it's fallen below 1.00%.

Don't get complacent

It's not boding well for savers, and as Charlotte says, with there now being only one rate increase recorded for every nine cuts, "savers would be right to expect this trend of sliding rates to continue".

But that doesn't mean you should get complacent; if anything, it makes it even more important to be on the ball when it comes to savings rates. "There's no denying that savers are facing hard times; however, this does not mean that they should be content to let their money languish in poor paying accounts," explains Charlotte.

"There are good deals out there, but savers will need to keep a close eye on the best buy tables to find a deal that will bolster their returns in a market that is very much under siege." So don't put up with poor returns! It may take a bit of research, but if you spend time comparing the options, you could still snare a savings deal that'll help you get more from your money.

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.