You are here: Home - Saving & Banking - News -

Inflation-beating returns may not be here for long

Written by: Emma Lunn
Moneyfacts is urging savers to lock into fixed rate bonds in a bid to beat inflation.

Inflation may sit below the government target of 2 per cent at the moment, but savers who fail to lock into a longer-term fixed rate bond may find their cash gets eroded in the future.

The forecast for inflation is expected to hit 2.2 per cent in Q4 2022, but at the moment there is only one three-year fixed bond that can beat this rate.

This month is also the first time in 18 months that the top one-year fixed bond rate (1.85 per cent from Gatehouse Bank) has fallen below 2 per cent.

The consumer price index (CPI) fell to 1.5 per cent during October. Moneyfacts calculated that this means 199 fixed rate bonds, 50 fixed rate ISAs and 18 notice accounts (based on a £10,000 deposit) can now match or beat inflation. Within that, 168 fixed bonds, 40 fixed ISAs and 16 notice accounts pay more than 1.5 per cent.

In November 2018, just 20 deals (all fixed rate bonds) could beat the October CPI inflation rate of 2.4 per cent; in November 2017, there were no standard savings accounts that could outpace the CPI rate of 3 per cent.

Rachel Springall, finance expert at, said: “Due to the cost of various goods falling, households may not have the attitude to save right now, particularly in the run-up to the festive period, but this could be a dangerous view. If consumers come up against financial constraints in the coming months without any substantial savings to fall back on, it may be a struggle to pay for the everyday essentials. Savers may not be able to beat inflation with an easy access account today, but they can get access to their money quickly, so interest may not be the magnet for some.

“Despite the forecasts that inflation will remain below target this time next year, if it were to hit or indeed breach the 2 per cent target, savers would need to lock into a fixed rate bond to beat it. Sadly for savers, fixed returns are plummeting, and this month is the first time in 18 months that the top rate offered on a one-year fixed bond has fallen below 2 per cent.

“However, the forecast also estimates a breach in 2022, in which CPI will hit 2.2 per cent in Q4. Our data shows that only one three-year fixed bond can beat 2.20 per cent, as an expected profit rate from Al Rayan Bank. As fixed bonds continue to plummet, there is no telling how long this bond will remain on offer.”

At the moment the best paying one-year fixed rate bond is from Gatehouse Bank at 1.85 per cent; the top-paying two-year bond is from Al Rayan Bank at 2.15 per cent; the best three-year fixed deal is from Al Rayan at 2.30 per cent; BLME takes the top spot for four-year bonds (2.10 per cent), and UBL UK for a five-year fix (2.47 per cent).

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

It’s time to get your finances in shape, and moving your cash savings to a higher paying deal is a good plac...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

The experts’ guide to sorting out your personal finances in 2021

From opting to ‘low spend’ months to imposing your own ‘cooling-off period’, industry experts reveal t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week