Hundreds of savings accounts now beat inflation as the official rate falls to 1.3% – including 17 easy-access deals
- Highest number of accounts which match or beat CPI since August 2016
- Figures from Savings Champion found 17 of those are easy-access deals
- The fall to 1.3% may mean a base rate cut could be due, so savers should take advantage of the choice if they can
The number of savings accounts which match or beat inflation has risen to its highest level in nearly three and a half years, after inflation fell in December.
There are now 438 savings accounts paying at least the Consumer Prices Index of 1.3 per cent, figures from Savings Champion show.
While the vast majority of those accounts require savers to lock money away for as long as seven years, the list includes 17 easy-access savings accounts, after the annual rate of inflation fell by 0.2 percentage points on November’s figures.
Spoiled for choice: 438 savings accounts now match or beat inflation, the most since August 2016
Savings Champion say the number of accounts which match or beat the CPI is at its highest since August 2016, when the rate of inflation was just 0.6 per cent.
The Office for National Statistics says inflation hit a three-year low in December 2019.
According to Savings Champion, 355 of the inflation-beating accounts are regular savings accounts and 128 are tax-free ones.
Five easy-access cash Isas in This is Money’s best buy tables pay at least 1.3 per cent while one, from Cynergy Bank, pays 1.31 per cent, just beating the current rate of inflation.
The online account from Cynergy also does not come with a bonus rate.
Meanwhile, seven of the easy-access accounts in This is Money’s tables pay at least this, six of which pay more.
|Account type||Number of on-sale accounts|
|Up to 2-year fixed-rate||78|
|Source: Savings Champion|
And 78 of the accounts are shorter-term fixed-rate bonds lasting up to two years, which might be another appealing option for savers.
Fixed-rate savings deals, particularly ones lasting longer than two years, took a beating throughout 2019 thanks to a fierce mortgage price war and political uncertainty.
But if shorter length accounts beat inflation savers may consider the trade-off of tying up money for a year in return for better returns worthwhile.
The best one-year fixed-rate account in This is Money’s tables is offered by Gatehouse and pays 1.7 per cent, while the best one-year Isa comes from Charter Savings Bank and pays a lower 1.41 per cent on balances above £5,000.
Both accounts can be opened online.
However, while the booming number of inflation-matching accounts is good news for savers, the lower rate of inflation could spell bad news.
There have already been suggestions that a Bank of England base rate cut is on the horizon, with several policymakers indicating they would vote for a reduction from 0.75 per cent.
Kevin Brown, savings specialist at investment firm Scottish Friendly, said: ‘This unexpected drop in the rate of inflation to 1.3 per cent heralds the very real prospect of a Bank of England base rate cut at the end of the month.
‘Inflation slowing again is a signal that consumer confidence is weak and weakening further.
‘The rate at which prices increase has been on a downward trajectory for some time and this will be a signal to the Monetary Policy Committee that now might be the time to act to ease the supply of money.
‘The Bank of England has a target rate of 2 per cent, and with the real rate slipping away as GDP flatlines, action is ever more likely.’
Banks and building societies tend to be far quicker to pass on base rate cuts to savers than they are rises.
Meanwhile, another expert warns that savings rates continue to fall.
Rachel Springall, of Moneyfacts, 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 per cent – well below the current rate of inflation, so savers are losing money in real terms.
‘As inflation is expected to rise to 2.2 per cent 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.’
THIS IS MONEY’S FIVE OF THE BEST SAVINGS DEALS