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Rachel Springall

Finance Expert & Press Officer
Published: 19/10/2022
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Staples such as milk and bread saw some of the greatest increases in price.

UK inflation rose at an annual rate of 10.1% in September, an increase from the 9.9% recorded in the 12 months leading to August according to the Office for National Statistics (ONS).

The largest contributing factor towards the return to double digit inflation came from rising food prices. This marks the 14th consecutive monthly rise in annual food prices, with the 12 months leading to September seeing a 14.6% rise in prices for this sector.

This means the pace at which food prices are rising is at its fastest since April 1980, eclipsing the 14.5% rise reached during the financial crisis in 2008.

In particular, staples such as bread, milk, meat, eggs, and cheese saw significant monthly rises.

What does this mean for your mortgage?

Currently, the average two and five year fixed rates remain over 6% and they are continuing to increase, according to Moneyfacts data.

Furthermore, the Bank of England may be concerned to see core inflation rising, despite the Government’s energy price cap of £2,500 making the price of energy more affordable.  

This may prompt a more aggressive base rate hike in the future, which could see mortgage rates rise further. Therefore, getting the advice of a broker is paramount in these circumstances.

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What does this mean for your savings?

Savers may be pleased that cash savings rates continue to rise amid uncertainties surrounding the stock market. In the year to date, the FTSE 100 has made a negative return of -9.59%, according to the London Stock Exchange.

Cash savings accounts are a traditional haven for consumers, and fixed interest rate paying accounts provide a clear guaranteed return for investors during unprecedented times of uncertainty.

However, inflation is still very much eroding the true spending power of savers’ cash, so it’s imperative savers do not become apathetic to switch at a time when competition in the top rate tables is rife.

Top fixed bonds are reaching heights not seen for many years as challenger banks compete to entice savings deposits, but this has also seen deals change within a short time frame, so swift movement is wise to grab a top rate savings deal.

Those savers who are about to see their one-year bond mature may wish to note the best deal today pays 4.75%, which is 3.24% more than last year’s top deal, of 1.51% as an expected profit rate. One-year fixed ISAs are also on the up, but still pay less than fixed bonds, so as interest rates continue to rise, it’s imperative savers consider both their ISA allowance and their Personal Savings Allowance along with comparing interest rates.

Amid the cost of living crisis, some savers may prefer to keep their cash close to hand, and thankfully, variable rates on both easy access accounts and ISAs have improved but savers will need to check the terms of each account to ensure it suits their needs.

It is largely expected that the Bank of England will increase the base rate in the coming weeks, but savers would be wise to review their existing accounts now and switch to take advantage of the latest top rate deals.

As we have seen time and time again, there is no guarantee that savers will see much benefit from a base rate rise, so it’s important they reconsider their loyalty if they are getting a raw deal.


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