Savings News

Today’s Consumer Price Index (CPI) figures reveal that inflation rose to 0.6% during December, an increase from 0.3% the previous month.

As a result of the rise in inflation, our research has found that there are now 214 standard savings accounts that can now match or beat inflation. Of these, 144 are fixed rate bonds, 51 are fixed rate ISAs, 13 are notice accounts, three are easy access accounts, and three are variable rate ISAs*.

Savers considering a fixed rate bond or ISA should keep in mind that the predicted rate for inflation during the final three months of 2021 is 2.1% and there are no savings accounts that can currently match or beat this rate. As such, if inflation rises as predicted, those locking into a fixed term account could find that their savings are eroded by inflation.

As fixed savings accounts rates remain low, many savers are turning to easy access accounts as an alternative option. The benefit of an easy access savings account is that it allows more flexibility than a fixed account and savers can access the funds within the account. Currently the top rate in the easy access chart can match today’s inflation rate, offering 0.60% AER, but savers should be aware that rates on these accounts can change at any time. As well as this, over the past year easy access accounts have seen a significant fall in rates and with the continued economic uncertainty and historic low Bank of England base rate, rates could fall further. As Rachel Springall, finance expert at Moneyfacts.co.uk, explained: “One of the most flexible savings vehicles is easy access accounts but they have been hit hard by rate cuts. Indeed, over the past 12 months the top deal has fallen by more than half, down from 1.40% to 0.60% – on a savings pot of £20,000 that’s a loss of interest of £160 over one year. As the economic outlook remains unpredictable and base rate keeps at a historic low, it would not be too unsurprising to see further cuts as providers adjust their market position in response to an influx of cash into sought-after deals.”

Although the savings market remains challenging, banks are still launching new chart-topping rates and savers should regularly check the savings charts to keep up-to-date with the best rates available. Springall added: “Despite the uncertain state of the market, it appears challenger banks and Islamic banks continue to take a firm place within the top rate tables, so any savers looking to acquire the best possible return would be wise to consider these less familiar brands. However, a word of caution to savers weighing up their options, the savings market remains erratic and a good deal doesn’t last long on the shelf, so quickness is key.”

*Based on a £10,000 deposit

It has not been a very happy start to 2021 for savers, as new data shows that average saving rates across all savings charts have fallen month-on-month and have hit new lows.

The research, which is due to be published in the Moneyfacts UK Savings Trends Treasury Report, found that average savings rates in all charts have fallen between 1 December 2020 and 1 January 2021 and now stand at the lowest level since our electronic records began in 2007.

As the table below shows, year-on-year has seen a significant fall in saving rates. Although the average easy access savings account rate is the lowest available across all charts, this rate has seen the smallest fall of all average rates, down by 0.41% year-on-year, from 0.59% on the 1 January 2020 to 0.18% on the 1 January 2021. Saying this, 0.18% sits well below inflation, which means that savers depositing their money into an easy access savings account in the long-term will likely see inflation eroding their hard-earned savings. As well as this, as many parts of the UK are once again in lockdown, those with excess disposable incomes are likely to increase their savings, which could in turn see savings rates fall further. As Rachel Springall, finance expert at Moneyfacts.co.uk, explained: “This latest lockdown could mean a further demise in savings rates on offer as providers may struggle to cope with demand and fill their desired subscription targets much too quickly.”

*Longer-term fixed bonds or ISAs are those with terms over 550 days. Average interest rates based on a £5,000 deposit as at the start of the month. Source: Moneyfacts Treasury Reports

It is not just new savers who will be disappointed with the falling saving rates, but those who have money in a fixed rate account or ISA that is maturing soon may struggle to find a new competitive rate. Here we take a look at what options are available to savers.

Savers looking for a fixed rate bond will be pleased to see that new higher rates entered the five, three and two year fixed rate bond charts this week. The top rates in last week’s easy access and notice charts remained available this week. Overall, the savings market remains challenging. Savers should regularly check the charts for new top rates and act quickly to avoid missing out.

There was little change at the top of the ISA charts this week, with many of last week’s top rates still available in the charts. With the continued economic uncertainty, it is unlikely that ISA rates will see significant improvement over the next few weeks, but ISA savers should regularly check the charts in case a new top rate is launched.

Savers should be aware that the rates below are the best rates available at 1pm on Thursday 14 January 2021 and, although correct at the time of publishing, they may not be available after this time.