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Nightmare for savers as inflation soars

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Written by: Emma Lunn
16/02/2022
Savers are losing money in real terms as the surging cost of living means there are no savings accounts that beat inflation.

The ONS announced today that Consumer Price Index (CPI) rose to 5.5% during January, from 5.4% in December.

Although a handful of savings accounts have upped their interest rate since last month, inflation still outpaces the rates on offer. This makes it more important than ever to get the best savings deal to soften inflation’s eroding impact.

Analysis by Moneyfacts found the number of deals able to beat inflation has not changed since last month – there is not one standard savings account that can outpace 5.5%.

The picture for savers is a lot bleaker than this time last year when 100 savings accounts could beat the January 2021 CPI rate of 0.7%, and in February 2020 when 21 accounts could beat the inflation rate of 1.8%.

The best easy access account at the moment is from Cynergy Bank and pays just 0.71%, while the best notice account is from Shawbrook Bank and pays 1.08%. Even five-year bonds are nowhere near the inflation rate – the top account is from UBL UK and pays 2.19%.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Despite a slight uplift to some of the top savings rates since last month’s inflation announcement, rising inflation is not allowing any respite. While the Bank of England predicts such a level to be temporary, even the government target of 2% cannot be beaten unless savers lock into a five-year fixed bond.

“There are still savers out there waiting for the December 2021 base rate rise to be passed onto them, let alone the most recent uplift of 0.25% a couple of weeks ago.

Those savers with the patience to wait may wish to reconsider their loyalty, particularly as they will not find a high-street bank featured in the top rate tables.”

Challenger banks and building societies dominate the top of the market both for variable and fixed rate deals, including ISAs. But Moneyfacts warns that those savers who are adamant to use their ISA allowance will find a gap between rates offered on ISAs versus those outside of tax-free wrapper, even taking to account some new market-leaders this month.

Springall added: “If savers are assessing bonds and ISAs, then it’s vital they consider their Personal Savings Allowance foremost.

“Those savers who prefer to have their cash close to hand in an easy access account or easy access ISA may have noticed a few prominent deals surface in recent weeks, but some have already been pulled or cut.

“As we have seen before with challenger banks, the highest rates can get taken up very quickly. Savers would therefore be wise to act quickly or may be left disappointed.”

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