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5 minute finance: The struggle against inflation

5 minute finance: The struggle against inflation

Category: Savings

Updated: 19/07/2010
First Published: 19/07/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Official figures out this week show the Government's target measure of inflation, the Consumer Price Index, has fallen for the second month in a row, down from 3.4% in May to 3.20% in June. The fall brings a small amount of respite for savers who are struggling in the current low interest rate environment to achieve a positive real return on their money.

The fall means that basic rate tax payers need to find an account paying 4.00% in order to break even, a level that is currently achievable on 47 accounts. Higher rate tax payers have a choice of two accounts, as they need to achieve a rate of 5.33% to break even.

The fall in inflation is only likely to be temporary as the awaited rise in VAT at the beginning of 2011 will push the level of inflation higher. The Governor of the Bank of England has already warned that the situation is likely to get worse before it gets any better. Savers will be pinning their hopes on normal fiscal policy starting to resume and the bank base rate and in turn savings rates will rise as soon as possible.

Driving up ISA rates

The AA has launched a new Access ISA paying 2.70%, including a 1.00% bonus for twelve months. For savers requiring a regular income from their money, a monthly interest option is available. Savers can invest upwards of £500 into the account, which accepts transfers in. No notice is required to access funds, but all withdrawals must be made via a nominated account.

Halifax keeps it simple

Halifax has launched its Clarity Credit Card MasterCard, which applies no foreign usage, cash withdrawal or balance transfer fees. New purchases and cash withdrawals are charged at a competitive 12.9% APR. Balance transfers are permitted and will be charged at the standard purchase rate. Existing current account customers, who spend at least £300 per month on the card, will benefit from £5 per month cashback.

A fixed rate combining value and flexibility

Leeds Building Society has launched a new range of fixed rate bonds paying up to 4.50%. Furthermore, all of the bonds allow access to 25% of the funds, without notice or penalty, at any time. The two year bond pays 2.50% up to £49,000, 3.00% up to £100,000 and 3.25% over £100,000. The three year bond pays an additional 0.25% on all three tiers and the five year bond a further 0.25%, with the top rate of 4.50% on deposits over £100,000. Savers can invest from a minimum of £100 up to £1 million.

Capitalise on a fixed rate for four years

The Nottingham Building Society has launched a new four year fixed rate bond paying 4.20% to 1 August 2014. Interest is paid annually and must be capitalised to the account. The account is only available via the post and requires a minimum opening of £1,000 and additional deposits of up to £250,000 can be made whilst the issue is still available.

Innovative new mortgage deal

Borrowers with just 35% or less of their mortgage outstanding are being targeted by Yorkshire Building Society with an innovative new mortgage deal. The mortgage has an initial rate of 2.69% for one year, subject to a £495 fee. At the end of the one year term borrowers are advised of the new one year fixed rate, which they will rollover onto. Alternatively borrowers can opt to move to the lenders SVR or remortgage to a new deal. In addition, borrowers will receive one year's free buildings and contents insurance with the society.

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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.