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Inflation recorded another large jump during December, and predictably, this has had a devastating impact on the number of savings accounts that can match or beat it, so much so that you'll now need to lock your money away if you want to secure an inflation-beating return.
Figures from the ONS show that the UK's rate of inflation, as measured by the Consumer Prices Index (CPI), rose to 1.6% in December, up from 1.2% in November. This is the highest rate of inflation seen since July 2014, and a larger jump than many economists predicted, perhaps setting the scene for the year ahead.
This certainly won't come as welcome news for savers, who are already being hit with continued rate cuts. Indeed, our figures show that rate reductions in the savings market have now outweighed rises for 15 consecutive months: just 21 savings rate rises were recorded in December, compared with 84 rate cuts, equating to four rate cuts for every rate rise, with some deals falling by as much as 0.60%.
This all means that there are very few accounts to choose from that will match or beat CPI's rate of 1.60%. In fact, there are now only 44 that manage to do so, out of a total of 669 savings accounts; of those, 43 deals are without restrictive criteria and open to everyone, including 42 fixed rate bonds and just one cash ISA. There are absolutely no easy access or notice savings accounts that match or beat inflation, which means savers will have to lock their funds away if they want to keep their funds erosion-free.
Unfortunately, it looks as though we could have more of this to come, as Rachel Springall, finance expert at Moneyfacts, explains:
"With inflation expected to rise significantly over 2017, it is sadly going to stay a dreadful time to be a saver. While there was a welcome slowdown in the number of cuts to savings rates last month, consumers will remain underwhelmed by the lack of competition for their cash.
"It will be no surprise if we start to see savers sacrifice the necessity to make savings provisions for the future in favour of overpaying their debts, particularly as there is little interest to be gained on most savings accounts currently on the market. In fact, some savers feel it is pointless to shop around for a better deal, assuming poor rates are everywhere, despite the majority not knowing how their current rate stacks up [according to research from Masthaven Bank]."
However, while it's easy to feel discouraged at times like this, it's still important to keep on top of the savings market, even if just a fraction more can be gained in interest. After all, there are some slight glimmers of hope out there – not only has the average long-term cash ISA rate edged up for the second consecutive month, but since the start of 2017, we've seen a selection of providers making minor improvements to their savings rates, including challengers such as RCI Bank, Post Office Money, Ikano Bank and Sainsbury's Bank.
However, while this is positive news, there is still a significant way to go before we can see rejuvenation in the market, says Rachel, which is why you may not want to keep all your eggs in one basket.
"Savers would be wise to consider dividing their investments across regular savers, current accounts, fixed rates and instant access for the best possible chance of securing decent returns, while maintaining some flexibility," Rachel advises. "Failing this, savers who would typically be warier about where they place their hard-earned cash could turn to riskier investments to attempt inflation-beating returns, which is cause for concern if done without proper guidance."
Get the best returns possible by comparing the best savings rates
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For a bit more security, take a look at the top long-term cash ISAs
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