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No accounts beat inflation, but rates improve

No accounts beat inflation, but rates improve

Category: Savings
18/07/2017

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Latest figures from the Office for National Statistics show that inflation unexpectedly fell to 2.6% in June, down from 2.9% in May. However, this hasn't been enough to improve savers' fortunes, as for a further month absolutely no savings accounts pay a rate that can beat it - yet all is not lost, as our latest data reveals continued improvement in the savings market, with rate rises having now outweighed cuts for six consecutive months.

The figures show that we recorded 125 rate rises in June against just 21 cuts, a welcome turnaround from years gone by, where rate cuts often dominated. The fixed sector has been playing a huge part in the recovery of the market so far this year, with last month showing that 78% of the recorded rate rises were for fixed rate bonds - which means that savers would be wise to review the current Best Buys, as they could be able to find a better deal.

"The most lucrative month so far this year has been March, when we recorded a staggering 163 rate rises, and it's promising to still see rises outweigh cuts as we pass the half-year point," said Rachel Springall, finance expert at Moneyfacts. "It's also a positive sign that the number of rises seen last month are superior to those seen at this time last year.

"While there have been murmurings of a base rate rise, this is looking less likely to appear over the shorter term. Thankfully, the cash market has been improving regardless, even if just slightly, thanks to challenger banks repeatedly leap-frogging their competition by making consecutive improvements to their range, particularly on fixed rate bonds."

Jul-15 Jul-16 Mar-17 Jun-17
Number of savings rate rises 112 16 163 125
Number of fixed rate bond rises 70 11 108 97
% of rises that were fixed bonds 63% 69% 66% 78%
Average fixed rate bond rise 0.17% 0.14% 0.15% 0.15%

However, despite this good news, it can't be denied that it's still impossible to secure a measurable return with a standard savings account, with inflation outpacing even the best fixed savings rate on the market (which currently comes from BLME, with its seven-year deal that pays an expected profit rate of 2.55%).

Then there's the fact that not everyone will want to squirrel their money away for years on end, so while it's "encouraging to have seen some slight recovery in the cash savings market for every month so far this year, clearly there is still room for improvement," said Rachel Springall, finance expert at Moneyfacts. "While some may think it's only positive that fixed rate bonds are fuelling the market's recovery, not every saver will want to lock in their cash."

As it stands, the only hope for those wanting to secure inflation-beating returns is to think outside the box - such as by opting for a regular savings account, a high interest current account or, for those comfortable with heightened risk, a stocks & shares ISA. However, while turning to riskier products may offer the chance of more appealing returns, "this is a hazardous choice without proper guidance", said Rachel.

This is why, if you're thinking about investing in stocks & shares ISAs, you need to make absolutely certain that you know what you're doing. Ideally seek independent financial advice to ensure it's the right course of action for your particular financial goals, and make sure you understand the risks of this kind of investment.

If you're comfortable with that, then it's time to check out a selection of the best stocks & shares ISAs available - but if you decide that this form of saving is slightly higher risk than you're hoping for, it's best to stick to cash. Compare the best savings rates to stand the best possible chance of protecting your cash from inflation, and if you've got smaller sums to invest - or are happy with a bit of active management - then a high interest current account could be ideal. You may even find you're able to beat inflation...

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.

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