Inflation taking its toll on your cash reserves

The savings market has seen some top-rate accounts improving since last month, but not on shorter-term fixed bonds. However, inflation continues to take its toll on the true spending power cash. The latest analysis from Moneyfacts.co.uk reveals the top rate deals available to savers searching for a competitive return.

The Consumer Price Index (CPI) rose to 4.2% during October, from 3.1% in September.

The number of deals able to outpace inflation has not changed since last month. There is not one standard savings account that can outpace 4.2%.

The predicted rate for inflation during Q4 2022 is 3.4%.

In November 2020, 227 deals (seven easy access, 17 notice accounts, four variable rate ISAs, 38 fixed rate ISAs and 161 fixed rate bonds) could beat 0.7% (October CPI) and in November 2019, 224 deals (168 fixed rate bonds, 40 fixed rate ISAs and 16 notice accounts) could outpace 1.5% (October CPI).

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said: “Inflation erosion on the true spending power of cash persists and any attempts to ease the strain is unlikely to ease the frustration of savers in a low-interest rate environment.

“Easy access accounts remain a firm favourite among savers due to their flexibility and rates have improved since last month, but the top rate today still pays less than the best rate offered a year ago. However, it is the fixed bond market that has shown more notable improvements to rates compared to a year ago, and savers can now get a better rate on a one-year bond than they could have secured on a two-year bond last November. Fixed-rate ISAs have also improved this month, but there remains a notable difference in rate compared to fixed bonds. If savers are comparing bonds and ISAs, then it’s vital they consider their Personal Savings Allowance as fixed bonds pay higher rates.

“Interest rates on savings accounts on average dropped to record lows this year so the continued improvements to the top cash savings rates is positive, but in real terms, inflation is still taking its toll even on the best rates. The murmurings of a base rate rise could mean a further uplift to interest rates, but savers would be wise not to wait around for this to come to fruition. Competition among challenger banks and building societies is evident in the top rate tables and savers would be wise to act with pace to take advantage.”