Top savings deals flourish, but inflation persists | moneyfacts.co.uk

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Rachel Springall

Rachel Springall

Finance Expert & Press Officer
Published: 22/06/2022

Top savings deals are on the rise across various sectors, as providers compete for a place in the spotlight. Still, the Consumer Price Index (CPI) rose to 9.1% during May, from 9.0% in April meaning there is still not a single deal which is able to outpace inflation. 

Looking back, in June last year there were no deals that could beat May 2021's inflation rate of 2.1%. It was a different story in June 2020, when there were 440 deals (35 easy access, 38 notice accounts, 31 variable rate ISAs, 96 fixed rate ISAs and 240 fixed rate bonds) that could beat May 2020's inflation rate of 0.5%.

Should I consider a fixed or variable account?

Inflation is eating its way into the real spending power of consumers’ cash and there is not one cash savings account that pays anywhere close to CPI. It has now been over a year since savers were able to beat inflation, but over this period interest rates have been on a steady rise. This means savers coming off a fixed deal or who are comparing their existing variable accounts to the latest top rates could find a more attractive return. The Bank of England’s forecast for inflation is to float around 6.6% during Q2 2023, which is far above the current 2% target. If inflation was at 2%, savers could beat it today with a fixed bond or fixed ISA.

Savers who decide to fix a lump sum for a year will find the top one-year fixed bond rate is much higher than the top deal seen a year ago, which paid less than 1%. As interest rates fell to record lows in 2021, it’s refreshing to see such improvements across the savings spectrum this year. Along with the rising cost of living pressures, savers will find better returns but fixing for the longer-term may be too much of a commitment. Consumers may be wiser to spread their cash across easy access accounts and short-term fixed to secure a guaranteed return but also have a portion of their money ready to access in case of emergencies or to cover unexpected costs.

In such a volatile market, keeping abreast of rate rises is crucial for savers as there is no guarantee that table-topping accounts will stay on the shelf for long. The market is continuing to flourish due to competition from challenger banks and building societies, coupled with the back-to-back Bank of England base rate rises. However, loyal savers may not be benefiting very much, or at all, so it’s wise to compare offers and switch.

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