Derin Clark

Derin Clark

Online Reporter
Published: 17/07/2019

Statistics released today show that the inflation rate (Consumer Price Index) remained at 2.0% during June, meaning that 114 fixed rate bonds and 12 fixed rate ISAs (based on a £10,000 deposit) can now match or beat inflation*.

Top inflation-beating savings accounts

Research by Moneyfacts.co.uk shows that with inflation staying at 2.0%, 94 fixed rate bonds and six fixed rate ISAs beat the current rate of inflation. The top rate in the fixed rate bonds chart comes from Bank of London and The Middle East (BLME), which is offering an expected profit rate of 2.85% on its seven-year bond for a £1,000 deposit. The top rate in the one-year fixed rate bond chart is also offering an above-inflation rate of 2.35%. This is an expected profit rate on an 18-month bond that is again being offered by BLME on a £1,000 deposit. Within the fixed-rate ISA chart, United Trust Bank is offering the best rate of 2.30%, on an ISA that has a seven-year term and requires a £15,000 deposit. For savers looking for a shorter fixed rate ISA term, State Bank of India is offering a rate of 2.05% for a three-year term on a £5,000 deposit.

Growth in inflation-beating savings accounts

With 100 savings account beating the current rate of inflation, this is a significant improvement compared to two years ago when no standard savings accounts could outpace the then inflation rate of 2.6%. In fact, just a year ago in July 2018 only 13 savings accounts, all of which were fixed rate bonds, could beat the inflation rate of 2.4%.

Commenting on the increase in accounts offering inflation-beating rates, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The rate disparity between fixed rate bonds and fixed rate ISAs has been made even clearer this month, as the proportion of deals that can outpace the eroding impact of inflation is shocking. Today, nearly one-quarter (24%) of all fixed rate bonds beat 2%, but in the fixed ISA market only 4% of deals can do the same. This month, savers would need to lock into a three-year fixed rate ISA to beat inflation, but they could instead find a one-year fixed rate bond that would also pay above 2%.

“In real terms, many savers will be losing out unless they choose the top rates in the market. Whether saving money for a specific goal, such as a home or holiday, or even utilising cash savings interest as a monthly income, it is imperative that savers choose the right vehicle to ensure the purchasing power of their cash doesn’t fall.

“It’s not all bad news for savers however, with the situation still looking a little brighter year-on-year, as inflation was higher during July 2018, so much so that savers would have had to choose a four-year bond to beat the inflation rate of 2.4%. Further back in 2017, not one standard savings account* could beat 2.6% – the current rate of inflation at the time.

“As it stands, there is still some competition among the challenger banks to entice savers, but if inflation starts to rise higher it will become much more difficult for consumers to find an inflation-busting deal – especially if it’s within an ISA wrapper.”

 

*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.

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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