Derin Clark

Derin Clark

Online Reporter
Published: 14/08/2019

The news that inflation has risen to 2.1% (Consumer Price Index) in July means that savers will now find it even harder to find inflation-beating rates, research from Moneyfacts.co.uk reveals.

Savers looking for an inflation-beating rate will have to lock their money for at least a year with a fixed rate bond, or five years in a fixed rate ISA, in order to beat inflation. In fact, with the July rise in inflation, just 65 fixed rate bonds and two fixed rate ISAs (based on a £10,000 deposit) can now match or beat inflation*. Of these accounts, only 57 fixed bonds and one fixed ISA pays more than 2.1%.

While the rise in inflation means that fewer accounts are offering inflation-beating rates, overall savers have more options than they did just a year ago when only 21 accounts, all fixed rate bonds, could beat the August 2018 inflation rates of 2.5%. Two years ago, in August 2017, no standard savings accounts could outpace the then inflation rate of 2.6%.

Savings market analysis 

Top savings deals at £10,000 gross 15 Aug 2017 15 Aug 2018 Today
Easy access account Ulster Bank – 1.25% Coventry BS – 1.40% Virgin Money – 1.50%
Notice account Secure Trust Bank – 1.64% (180-day) Secure Trust Bank – 1.80% (180-day) PCF Bank – 1.85% (180-day)
One-year fixed rate bond Al Rayan Bank – 2.00%** BLME – 2.05% BLME – 2.10%**
Two-year fixed rate bond Al Rayan Bank – 2.09%** Secure Trust Bank – 2.26% BLME – 2.35%**
Three-year fixed rate bond Vanquis Bank – 2.20% Secure Trust Bank – 2.37% BLME – 2.55%**
Four-year fixed rate bond Vanquis Bank – 2.25% Secure Trust Bank – 2.51% BLME – 2.45%**
Five-year fixed rate bond United Bank UK – 2.53% United Bank UK – 2.79% BLME – 2.75%**

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The number of standard savings accounts that beat inflation has fallen from last month, bad news for savers looking to avoid its eroding power. There have also been rate cuts made to some of the most attractive fixed rate bonds over the same period. Despite this, the top rates across one to five-year fixed rate bonds can all match 2.10% – the current rate of inflation – which is good news for those seeking the security of a guaranteed return.

“Savers will find that the best rates are on offer from the more unfamiliar brands, but they shouldn’t be overlooked. Currently, Bank of London and The Middle East (BLME), an Islamic bank, leads the way with its fixed bonds, all of which pay an expected profit rate. As our data shows though, if inflation were to rise substantially this year, savers may need to tie their money down for two years or more to outpace its impact. 

“As we reported last month, there are hardly any ISAs that can outpace inflation. In fact, only one fixed rate ISA pays an interest rate above 2.10% today – plus this option would lock in savers cash for five years, which may be too much of a commitment for some. Two years ago however, not one standard savings account could beat inflation, which was 2.5% at the time.

“Savers should not be deterred in their attempts to protect their hard-earned cash from the eroding power of inflation, however it would be understandable if savers choose to opt for an easy access account or indeed a one-year fixed bond instead of a longer-term option during a period of economic uncertainty.

“Whichever option consumers choose right now, whether it be an instant access account or fixed rate bond, it is vital that they keep on top of the latest deals and not assume that rates will improve in the months to come.”

 

*Data note: Please note that these savings product numbers only include deals that are available to all UK residents and excludes regular savers and children’s savers (this figure does not count each interest payment option for each account), based on a £10,000 deposit. Higher rates may be available for larger deposits.

**Islamic bank, pays an expected profit rate.

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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