Savers Face Difficult Choices As Inflation Rises | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 14/07/2021

With the Consumer Price Index (CPI) rising to 2.5% in June, savers coming to the end of a fixed rate deal are facing a difficult decision as to where to deposit their funds as no accounts can currently match the rate of inflation.

Savers coming to the end of a one year fixed rate deal may be pleased to see that, due to saving rates starting to rise in recent weeks, they can now lock into a one year fixed deal at a higher rate than a year ago. Saying this, inflation in July last year stood at 0.6% and 306 saving deals could meet or beat this rate of inflation, whereas no accounts can offer inflation-beating rates today.

In addition to this, with inflation expected to continue rising, savers locking into a fixed deal may find that their savings are eroded further, as Rachel Springall, finance expert at Moneyfacts.co.uk explained: “It’s unknown how high inflation will rise in the months to come but it is still important for savers to keep on top of the changing market as rates continue to improve. There are ways to mitigate any time spent comparing deals, and that would be to sign up to newsletters and rate alerts so that they can react quickly to any enticing deals.”

To avoid missing out on potentially higher rates, savers may want to forgo locking their money into a fixed rate deal for the time being and instead deposit savings into a accessible easy access savings account. Those considering this option should, however, keep in mind that easy access saving rates are significantly lower than the rates being offered on fixed deals, including one year fixed rate bonds. As well as this, there is no guarantee that savings rates will continue to rise in the coming weeks and months.

Option for long-term savers

Long-term savers looking for an alternative to five year fixed rate bonds, could consider investing instead. Investments have a much greater risk than savings accounts as they can not only result in investors not making any returns on their investments, but they could also lose their initial capital as well. Due to the high risks involved, it is important to consider this option carefully before making a decision and may be worthwhile speaking to an independent financial advisor first. For more information about investing and the types of investments available visit our how to invest your money page.

How to get a free savings and investment review

Moneyfacts.co.uk readers with a minimum of £100,000 in savings and investments can get a free one-hour consultation about their saving and investment options with the award-winning, independent advisers Kellands Hale. Click here for more information or to book your free consultation.

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