Savers struggle to get inflation-beating rates | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 22/04/2020

Today’s announcement that inflation has fallen to 1.5% will be welcomed by savers looking for inflation-beating rates, but last month’s base rate cuts and the continued impact of the Coronavirus pandemic on the UK economy means that savers will still struggle to get rates able to beat inflation.

The Consumer Price Index (CPI) rate fell from 1.7% in February to 1.5% during March, which has resulted in an increase in the number of savings accounts now able to beat inflation, up from 26 in February to 65 today.

In fact, our research found that only four notice accounts, five fixed rate ISAs and 71 fixed rate bonds can now match or beat inflation. Within that, four notice accounts, four fixed rate ISAs and 57 fixed bonds pay more than 1.5%.

While it is positive to see that more savings accounts are able to match or beat inflation compared to last month, comparing this to a year ago, when 162 deals could beat the inflation rate of 1.9%, it shows the impact the Coronavirus pandemic and base rate cuts have had on the savings market.

Savings market analysis 

Top savings deals at £10,000 gross 18 Apr 2018 17 Apr 2019 25 Mar 2020 Today
Easy access account RCI Bank UK – 1.30% Kent Reliance – 1.50% Cynergy Bank – 1.31% RCI Bank UK – 1.20%
Notice account Secure Trust Bank – 1.65% (180 day) Charter Savings Bank – 1.90% (95 day) ICICI Bank UK – 1.59% (95-day) ICICI Bank UK – 1.59% (95-day)
One-year fixed rate bond Al Rayan Bank – 1.85%** BLME – 2.20%** OakNorth Bank – 1.57% BLME – 1.60%**
Two-year fixed rate bond Wyelands Bank – 2.15% Al Rayan Bank – 2.40%** Wesleyan Bank – 1.67% BLME – 1.75%**
Three-year fixed rate bond RCI Bank UK – 2.31% Gatehouse Bank – 2.55%** United Trust Bank – 1.80% Vanquis Bank – 1.80%
Four-year fixed rate bond Vanquis Bank – 2.47% BLME – 2.50%** RCI Bank UK – 1.80% RCI Bank UK – 1.80%
Five-year fixed rate bond United Bank UK – 2.79% Gatehouse Bank – 2.75%** Gatehouse Bank – 2.00%** RCI Bank UK – 1.90%

**Islamic bank, pays an expected profit rate. Inflation announcement dates. Source: Moneyfacts.co.uk

Commenting on the current savings market, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Savers may well be keeping their cash close to hand right now, so convenience could be taking over any ambitions to get an inflation-beating return. The two base rate cuts during March coupled with economic uncertainty amid the Covid-19 outbreak has prompted providers to cut rates, meaning there are now fewer deals on the market that can outpace inflation than the start of the year.

“The savings market looks almost unrecognisable to a year ago, where a higher inflation rate of 1.9% could be beaten by 162 fixed rate deals (142 fixed rate bonds, 20 fixed rate ISAs). Today, only 65 deals (four notice, four fixed rate ISAs and 57 fixed rate bonds) pay a rate greater than 1.5%, and savers would need to give notice or lock their cash away to get such a return. Interest rates have fallen across fixed accounts since a year ago, so much so that the top one-year bond paid 2.20% in April 2019, but today this cannot be achieved on any fixed rate bond, including those with a five-year term.

“Those savers coming off a one-year fixed bond today will notice a difference a 0.60% between the top rate in this sector versus the top deal a year ago – a disappointing reality for those who rely on their savings pots to boost their disposable income. More bad news is yet to come though, as inflation eats its way into the true spending power of savers’ cash. Inflation is expected to rise to 2.1% by Q1 2023. As it stands, there is not one standard savings account that can beat this rate*.

“If savers are hoping to secure an attractive rate, then applying quickly has never been so crucial. Savers must also review any accounts they currently have and switch if they are on a poor rate, and there may well be many people in this position considering the flurry of cuts already made or are in the works off the back of the two base rate cuts last month.”

 

*Data note: Please note that these savings product numbers only include deals that are available to all UK residents (no notice, notice, fixed rate bonds, variable or fixed ISAs) and excludes regular savers and children’s savers (this figure does not count each interest payment option for each account), based on a £10,000 deposit. Higher rates may be available for larger deposits.

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.

Cookies

Moneyfacts.co.uk will, like most other websites, place cookies onto your device. This includes tracking cookies.

I accept. Read our Cookie Policy