Savers rejoice as inflation falls | moneyfacts.co.uk
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Derin Clark

Derin Clark

Online Reporter
Published: 15/01/2020

With savers already feeling the strain of low rates, coupled with the potential of an upcoming base rate cut, they may rejoice at the news today that inflation fell to 1.3% during December.

With the fall in the Consumer Price Index to 1.3%, which is its lowest level since November 2016 when it stood at 1.2% , it means that there are more savings products can beat inflation, including a number of easy access accounts. Research from Moneyfacts.co.uk found that now there are currently 225 fixed rate bonds, 90 fixed rate ISAs, 14 variable rate ISAs, 39 notice accounts and 13 easy access accounts (based on a £10,000 deposit) that can beat or match inflation. Within that, 210 fixed bonds, 79 fixed ISAs, five variable rate ISAs, 29 notice accounts and eight easy access accounts pay more than 1.3%.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The savings market continues to be under threat by cuts and withdrawals, as competition stagnates amid economic and political uncertainty. There appears to be little incentive for savings providers to challenge their peers with market-leading returns and, in fact, a race down the top rate tables is a more common sight than a race to the top right now.

“Inflation may have fallen this month, but for some it continues to eat its way into the real return of cash savings rates – with the average easy access rate standing at 0.59% – well below the current rate of inflation, so savers are losing money in real terms. As inflation is expected to rise to 2.2% by Q4 2022, savers would need to lock their cash into a five-year fixed rate bond to beat it, but the term of such a bond may be an uncomfortable commitment for many.

“As savers brace themselves for a potential base rate cut by the Bank of England, it is important that they take some time to compare savings deals now and take advantage of any lucrative variable rates before they potentially worsen – which is typical after a rate cut.

“Those savers who fail to investigate rates often from the more unfamiliar brands could miss out, as the challenger banks tend to offer some of the best rates going, way beyond the interest on offer from the bigger high street banks. Still, it would be understandable to see apathy among consumers when savings providers do little to entice them.”

 

Savings market analysis 

Top savings deals at £10,000 gross 12 Jan 2018 16 Jan 2019 Today
Easy access account AA – 1.32% Cynergy Bank – 1.50% Gatehouse Bank – 1.40%**
Notice account Secure Trust Bank – 1.65% (180-day) Charter Savings Bank – 1.88% (95-day) BLME – 1.70% (90-day)**
One-year fixed rate bond Al Rayan Bank – 1.85%** Al Rayan Bank – 2.10%** BLME – 1.80%**
Two-year fixed rate bond Union Bank of India (UK) Ltd – 2.05% Al Rayan Bank – 2.40%** BLME – 1.95%**
Three-year fixed rate bond United Trust Bank – 2.20% Al Rayan Bank – 2.50%** BLME – 2.10%**
Four-year fixed rate bond Masthaven Bank – 2.23% Union Bank of India (UK) Ltd – 2.50% BLME – 2.10%**
Five-year fixed rate bond PCF Bank – 2.42% Atom Bank – 2.70% UBL UK – 2.50% (payable on maturity)

**Islamic bank, pays an expected profit rate. Inflation announcement dates

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