Inflation rises for the first time since January

The June Consumer Prices Index (CPI) figures, released today, show that inflation has risen to 0.6%, up from 0.5% during May, and the first inflation increase since January.

While this means that fewer savings accounts now offer inflation-beating rates, which coupled with the continuing fall in savings rates will be a further blow to savers, the inflation rate still remains low and well below the Bank of England target of 2%.

Just 359 savings accounts currently match or beat the June inflation of 0.6%*. Of these 214 are fixed rate bonds, 82 fixed rate ISAs, 27 notice accounts, 19 easy access accounts and 17 variable rate ISAs. “While there are hundreds of savings accounts on the market today that can outpace the eroding effects of inflation, the current deals available may not be able to beat the expected rise in the years to come,” explained Rachel Springall, finance expert at Moneyfactscompare.co.uk. “The expected rate of inflation in Q2 2021 is predicted to climb to 1.4% and savers would need to tie up their cash for at least four years in a fixed rate bond to beat this today. As it stands, not one standard savings account can beat the Government’s target of 2% if this were to be met.”

Currently, all the top savings rates are able to beat the inflation rate of 0.60%.

While all the top rates can currently beat inflation, long-term savers should be wary of locking their money away into five-year or longer account as there is the possibility that inflation will rise and interest rates increase, results in them losing value on their savings over time. Instead, savers could look to short-term accounts, which although are currently offering lower rates than long-term accounts, provide savers with the option of being able to withdraw their funds and re-deposit them in the event that savings rates begin to rise. Alternatively, long-term savers prepared to take on a risker investment could consider a stocks and shares ISA or even investing in a buy-to-let property.

*Data note: Please note that these savings product numbers only include deals that are available to all UK residents (no notice/easy access, notice, fixed rate bonds, variable or fixed ISAs) and excludes regular savers and children’s savers (this figure does not count each interest payment option for each account), based on a £10,000 deposit. Higher rates may be available for larger deposits.