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Published: 11/04/2017

Official figures show that the measure of CPI remained unchanged at 2.3% in March, offering some welcome respite from the onslaught of rising inflation we've seen in recent months. However, it'll come as little consolation to savers – our data shows that just two savings accounts can pay a rate that will match or beat it, and as a result, negative interest is becoming a reality for many.


Take a look at the best savings rates in the market and you'll soon see that there's very little to choose from that will offer an inflation-beating return – which is why the two accounts that are able to do just that should be your first port of call.

Out of the 740 savings accounts currently available, only Ikano Bank's five-year bond is able to beat inflation with a market-leading rate of 2.35%, while Milestone Savings can match CPI by paying an expected profit rate of 2.30%. You'll be able to find a few more inflation-beating returns if you're interested in a regular savings account, but given that these aren't suitable for lump sum investments, they won't be ideal for everyone.

However, it isn't all bad. Last month only one bond in the market was able to match inflation, so this month shows a definite improvement, as is further highlighted by the finding that the number of rate rises has now outweighed the number of reductions for the third consecutive month.

Our data shows that 163 savings rate rises were recorded in March, with some rates rising by as much as 1.20%, which dwarfed the 65 rate cuts that took place over the same period. As a result, the average five-year fixed rate has now risen to levels not seen since August 2016, reaching 1.81%, so it looks as though the market could be starting to turn a corner.

Eroding returns

Unfortunately, even with these latest rate rises, the impact of inflation means savers may not be benefiting to any extent. After all, once inflation has been taken into account, most savings accounts on the market are effectively paying negative rates of interest, which means your savings pot is quietly being eroded.

"Savers are likely asking themselves whether it's still considered 'saving' if they are in fact losing money because of the inflation bite," said Rachel Springall, finance expert at "It's true that providers are not technically charging customers to hold their deposits, but if the interest rate is not outpacing inflation, the spending power of that cash will be eroded over time.

"As a result, there is likely to be very little incentive for savers to take out a savings account right now, particularly when you consider that the high street banks can pay up to 5% on their current accounts. However, these typically have restrictive criteria, so even they may not be suitable for those looking for real returns."

Signs of life

It isn't looking good right now, but many savers will be hoping for the recent uptick in rates to continue. After all, there's finally some optimism back in the Best Buys: new market-leaders have emerged in almost every sector over the past month, most of which are held by challenger banks and mutuals, who are consistently offering better deals than the high street banks.

After all, some high street providers offer easy access rates of as little as 0.01%, while the best in the market stands at 1.15% (albeit with a 12-month bonus), so it's easy to see why these smaller providers are becoming ever-more attractive.

"What is also beneficial for savers is the Government's Personal Savings Allowance (PSA), which helps them keep more of their savings interest tax-free, and there are schemes on offer for those looking to buy their first home or save towards retirement," added Rachel. "These incentives may well encourage some to be more serious about putting money aside for the future.

"Whilst the current state of the market will be disheartening overall, the hard work will be down to savers, who will need to seek better returns and switch regularly to keep on top of the best deals. Savings rates are improving – we have seen 317 rate rises in the first three months of this year – so savers should hold out some hope that something better might be out there for them."

What next?

Stay on the ball when it comes to savings rates – find the best savings accounts on the market by checking out our Best Buys and savings search tool.

Don't forget about your ISA allowance! You've got a tax-free allowance of £20,000 for the 2017/18 tax year, so make the most of it with the best cash ISAs.


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. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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