Rising UK Inflation Means it’s Still a Dreadful time to be a Saver

By: MoneyFacts

Data from Moneyfacts.co.uk can reveal that rate reductions in the savings market have now outweighed rate rises for 15 consecutive months.

In December, Moneyfacts recorded 21 savings rate rises. Disappointingly, rate reductions over the same period outshone this figure, with the number of rate decreases standing at 84 – which translates to four cuts to every rate rise – and some deals falling by as much as 0.60%, much higher than the current Bank of England Base Rate of 0.25%.

Statistics released today show that the Consumer Prices Index (CPI) rose to 1.60% during December, which means that savers still have very few accounts to choose from that match or beat it. Today, very few (44 of 669*) savings accounts currently on the market can beat or match inflation, of which 43 deals (0 no notice, 0 notice, 42 fixed rate bonds and 1 cash ISAs) are without restrictive criteria – most of which are fixed rates over a longer term.

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:          

“With inflation expected to rise significantly over 2017, it is sadly going to stay a dreadful time to be a saver. While there was a welcome slowdown in the number of cuts to savings rates last month, consumers will remain underwhelmed by the lack of competition for their cash.

“It will be no surprise if we start to see savers sacrifice the necessity to make savings provisions for the future in favour of overpaying their debts, particularly as there is little interest to be gained on most savings accounts currently on the market. In fact, some savers feel it is pointless to shop around for a better deal, assuming poor rates are everywhere, despite the majority not knowing how their current rate stacks up**.

“While savers may feel discouraged, it is still important to keep on top of the savings market, even if just a fraction more can be gained in interest. Since the start of 2017 we have seen a small selection of providers making minor improvements to their savings rates, which includes challengers such as RCI Bank, Post Office Money, Ikano Bank and Sainsbury’s Bank. While this is positive news, there is still a significant way to go before we can see rejuvenation in the market.

“Savers would be wise to consider dividing their investments across regular savers, current accounts, fixed rates and instant access for the best possible chance of decent interest rates, while maintaining some flexibility. Failing this, savers who would typically be warier about where they place their hard-earned cash could turn to riskier investments to attempt inflation-beating returns, which is cause for concern if done without proper guidance.”

*Data Note: Please note that these savings product numbers only include deals that are available to all UK residents (this figure does not count each interest payment option for each account). Moneyfacts has chosen not to include products that have limited access, such as locals-only, high net-worth clients or linked products which mean you must have an existing account to obtain headline rates. Moneyfacts has taken the view that as these accounts are not available to your entire readership, their inclusion may be misleading to your readers by directing them to accounts they may not be entitled to. We do, of course, hold all this data should you require it. Our daily Moneyfacts savings rate monitoring started in July 2015 and is a record of live standard savings account changes, which include fixed rate bonds of all terms, all ISAs, notice accounts and no notice accounts.

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