Inflation has risen for a further month, with the measure of CPI standing at 2.9% in May, up from 2.7% in April and the highest level of inflation seen since June 2013. This was largely expected by economists, but it certainly won't be welcomed by consumers, many of whom are already feeling the squeeze. The slight silver lining is that savings rates are beginning to rise – albeit not to inflation-beating levels – but you'll need to act fast if you want to nab the best deals.
Our latest figures reveal that the savings market has shown some signs of improvement since the start of 2017, with the number of savings rate rises outweighing cuts for the fifth month running. In fact, rises outnumbered cuts by a third, as we recorded 95 rate rises in May compared with 60 rate reductions.
Most of these increases were made by challenger banks and other smaller providers – take a look at the best savings rates and you'll see a definite lack of big names, which just goes to show that you need to take a whole of market view when looking for an account. These smaller providers still need your cash and are competing accordingly, and as a result, many keep giving their rates a welcome boost.
However, those rises unfortunately haven't been significant enough to result in an account that beats inflation, as once again, absolutely none of the 750 standard savings accounts on the market pay a rate that can beat it. But that doesn't mean you should turn away from the savings market altogether – if anything, now's the time to be on the ball, because if you're not quick enough to apply or fail to keep track of the market, you could easily miss out on the best deals.
"While it's positive to see a greater number of savings rate rises over the last month, this was largely thanks to the challenger banks and mutuals, which continue to prop up the market with the best deals," said Rachel Springall, finance expert at moneyfacts.co.uk. "Inflation is becoming more of a threat and rates are still low compared to years gone by, which could be putting off savers looking to build a nest egg.
"Savers must not be deterred from searching for a good deal, however, as their apathy could mean missing out on much better returns. As an example, someone with £20,000 in a NatWest Instant Saver would earn just £2 over a year, but they could earn £222 if they held an easy access account with Charter Savings Bank paying 1.11% instead, which is currently the top deal."
If you do decide to chase down a more competitive deal, don't wait around too long! Many of the best rates are only available for a short time period thanks to a rush of interest from hard-pressed savers. A good example of this is the Ford Money regular saving account, which paid 4% and was withdrawn after just one day.
"Challenger banks can change their savings range much more quickly than other brands, which means savers will need to be fast in order to grab the highest rates," said Rachel. "In many cases, if savers aren't online, they could well be missing out on not just savings alerts, but also some of the best deals.
"Those who prefer to open their savings account on foot will find a distinct lack of interest in cash savings among the high street brands, which seem to be taking a vacation from the Best Buy tables. Similarly, those savers investing in ISAs may well find better returns on non-ISAs – even if they pick the best cash ISA available, they could be missing out on better savings interest away from the scheme.
"Even if interest rates stay low, not all hope is lost for savers – there are still Government initiatives that can support those eligible, such as the Personal Savings Allowance (PSA), Help to Buy ISA and Lifetime ISA (LISA). Those saving for a deposit on their first home would be wise not to miss out on a 25% boost by using a Help to Buy ISA, and if the scheme ends before they have the chance to buy a home, they can move the funds into a LISA. Skipton BS launched the first ever cash LISA last week, which will hopefully spur on other institutions to follow suit."
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