Inflation More Than Doubles To 1.5 Per Cent | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 19/05/2021

Today’s announcement that the Consumer Price Index (CPI) has risen to 1.5% will come as a disappointment to savers, as no savings accounts can currently match or beat this inflation rate.

April saw the rate of inflation increase by 0.8% compared to the previous month, when it stood at 0.7%. Although month-on-month has seen a slight increase in some average saving rates, these increases are not enough to see any savings accounts match 1.5%, with the nearest rate being offered by Gatehouse Bank, which pays an expected profit rate of 1.40% AER on its five year fixed rate bond.

“The current level of inflation will make a clear impact on savers, as unless they have their cash already stashed away in a fixed rate account that can beat it, the spending power of their cash has been eroded in real terms,” explained Rachel Springall, finance expert at Moneyfacts.co.uk. “The predicted rate for inflation in Q2 2022 is expected to rise to 2.3% and today the top five year fixed rate bond pays just 1.40%, for those using an easy access account the top rate is 0.50%, while for ISAs the top rates are 1.10% and 0.45% respectively.

“This news could well overshadow the otherwise positive changes we have seen on some of the top fixed rate bonds and ISAs this month, but it’s vital savers take time to consider the new deals on offer. Indeed, as savers debate what to do with their cash, since the start of the month we have seen improvements from various challenger banks. On one year fixed bonds, Atom Bank now pays 0.85%, Shawbrook Bank pays 0.75% and BLME pays 0.75% as an expected profit rate, Allica Bank pays 0.76% and each of these brands has increased these rates since the start of May.”

Savers looking for quick access to their money by saving into an easy access savings account, will struggle to get a rate that is close to inflation, with the top rate in this chart being offered by Atom Bank, which pays 0.50% AER. “It is hoped the positive uplift to fixed rates will continue in the weeks to come but there is no guarantee, plus if savers prefer to keep their cash in an account with quick access, then they need to be fast to acquire the top rates,” warned Springall. “Indeed, some top-rate deals – including those from Paragon Bank and Kent Reliance – were withdrawn this month. Signing up to newsletters or alerts is wise to keep on top of the latest deals to surface so savers are not left disappointed.”

Long-term savers who will not need to access their funds for a minimum of five years may want to consider investments, such as a stocks and shares ISA, as an alternative to savings accounts. It is important to remember that investing is a much riskier option than savings accounts, with no guaranteed return on investments and there is also the possibility of investors losing their initial deposits. For more information about the different types of investments available, visit our how to invest your money page.

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