Unsurprisingly not one standard savings account that can outpace inflation

Unsurprisingly not one standard savings account that can outpace inflation

10:48 AM, 20th July 2022, About 4 weeks ago

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Some fixed savings rates have more than doubled in the last year, but inflation continues to outpace cash interest returns. Moneyfacts.co.uk reveals the top rate deals available for liquid funds if you have to park any deposits.

The Consumer Price Index (CPI) rose to 9.4% during June, from 9.1% in May. Unsurprisingly, there is not one standard savings account that can outpace inflation.

The predicted rate for inflation during Q2 2023 is 6.6%. In July 2021, there were no deals that could beat 2.5% (June 2021 CPI) and in July 2020, there were 306 deals (16 easy access, 19 notice accounts, 12 variable rate ISAs, 69 fixed rate ISAs and 190 fixed rate bonds) that could beat 0.6% (June 2020 CPI).

Savings market analysis
Top savings deals at £10,000 gross 15-Jul-20 14-Jul-21 22-Jun-22 Today
Easy access account National Savings & Investments – 1.15% ICICI Bank UK – 0.50% Virgin Money – 1.55%*** Al Rayan Bank – 1.60%**
Notice account ICICI Bank UK – 1.39% (95-day) OakNorth Bank – 0.76% (120-day) Oxbury Bank – 1.95% (180-day) OakNorth Bank – 2.05% (120-day)
One-year fixed rate bond Allica Bank– 1.05% Gatehouse Bank – 1.10%** Atom Bank – 2.60% Tandem Bank – 2.75%
Two-year fixed rate bond BLME – 1.35%** JN Bank – 1.21% BLME – 3.00%** Gatehouse Bank – 3.10%**
Three-year fixed rate bond BLME – 1.40%** UBL UK – 1.33% (payable on maturity) BLME – 3.05%** Aldermore – 3.15%
Four-year fixed rate bond BLME – 1.45%** JN Bank – 1.45% BLME – 3.10%** Aldermore – 3.20%
Five-year fixed rate bond BLME – 1.50%** UBL UK – 1.72% (payable on maturity) BLME – 3.25%** PCF Bank – 3.45%
**Islamic bank, pays an expected profit rate. ***Available to new and existing Current Account customers. Inflation announcement dates. Source: Moneyfacts.co.uk

 

ISA market analysis
Top savings deals at £10,000 gross 15-Jul-20 14-Jul-21 22-Jun-22 Today
Easy access ISA National Savings & Investments – 0.90% Marcus by Goldman Sachs® – 0.50% Paragon Bank – 1.35% Cynergy Bank – 1.40%
Notice ISA Teachers BS – 0.70% (90-day) Aldermore – 0.35% (30-day) Aldermore – 1.40% (30-day) Aldermore – 1.40% (30-day)
One-year fixed rate ISA Leek United BS – 0.75% OakNorth Bank – 0.72% Virgin Money – 2.06% Secure Trust Bank – 2.15%
Two-year fixed rate ISA Gatehouse Bank – 0.95%** OakNorth Bank – 0.86% Virgin Money – 2.36% Virgin Money – 2.56%
Three-year fixed rate ISA UBL UK – 1.11% (payable on maturity) UBL UK – 1.07% (payable on maturity) Leeds BS – 2.75% Aldermore – 2.75%
Four-year fixed rate ISA Hodge Bank – 0.85% Hodge Bank – 0.65% UBL UK – 2.44% (payable on maturity) Gatehouse Bank – 2.45%**
Five-year fixed rate ISA UBL UK – 1.24% (payable on maturity) UBL UK – 1.34% (payable on maturity) UBL UK – 2.74% (payable on maturity) UBL UK – 2.74% (payable on maturity)
**Islamic bank, pays an expected profit rate. ***Available to new and existing Current Account customers. Inflation announcement dates. Source: Moneyfacts.co.uk

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said: “Interest rates on savings accounts fell to record lows last year, so seeing such vast improvements across the top rate tables since then is reassuring. However, inflation is dampening progress as not one standard savings account can outpace its current level. One area of the savings market to see notable volatility is one-year fixed rate bonds, and savers will find the top rate deal (2.75%) pays more than double that of the top deal a year ago (1.10%). Fixed bonds and fixed ISAs overall are seeing improvements across all terms, and this competition has been predominantly fuelled by challenger banks jostling for a prominent position to entice savers’ deposits.

“Savers will find they can earn three times the return on the top easy access account right now (1.60%), compared to the best deal a year ago (0.50%), which is great news for those looking for a flexible pot to store their hard-earned cash. While this is positive, the stark reality is that inflation is eroding the real spending power of consumers’ cash and is expected to remain at a high level for some time. Indeed, the Bank of England predicts inflation to be around 6.6% during Q2 2023, so while this is less than the current level, it’s still considerably higher than the 2% target.

“As interest rates continue to rise, it’s uncertain whether savers would be content to lock their cash away for more than a year, particularly if they feel more improvements could surface or if they need the reassurance of dipping into their savings pot. Spreading cash across both easy access accounts and short-term fixed to secure a guaranteed return could be a wise move to get the best of both worlds. However, savers who are comparing easy access accounts must be mindful that not all of them allow unlimited withdrawals and, in some cases, heavy bonuses can apply for just 12 months – so it’s wise to make a note to switch before they expire.

“The five back-to-back Bank of England base rate rises may not be passed on in full to savings customers, so it’s vital they compare deals and switch if they are not being rewarded for their loyalty. As it stands, savers will find some of the best rates from the more unfamiliar brands, and so long as they have the same protections in place as a well-known bank, there is little reason to overlook them.”



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