Interest rates: Inflation-beating savings accounts rise - Britons urged to ‘act quickly’
Interest rates have tumbled recently, partly due to the decision of the Bank of England in March to decrease its base rate to an historic low of 0.1 percent. Today, the central bank made the decision to hold its base rate at this level, meaning the situation for the meantime is unlikely to change. With many familiar providers following suit, it has been difficult for Britons to secure the kind of deals many were hoping for, in the quest to grow their money.
This is coupled with the fact that inflation has now fallen, recorded at 0.3 percent in November, a drop from the 0.7 percent figure the month previously.
However, this does not mean it is the end for securing an inflation-beating account, and there are options which are still on the table.
Research from Moneyfacts has shown there are currently 496 savings accounts on the market which can beat the inflation rate.
These options are available across all types of savings, with the organisation breaking down the deals to be had.
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“Those savers looking to beat inflation today will find a brief respite as inflation fell to 0.3 percent but, as savings rates continue to fall across the market, speed is key to secure a top rate deal.
“Market-leading longer-term fixed rate bonds or ISAs have been choices for savers over many years to beat the government’s inflation target of two percent.
“But interest rates have been falling at such a pace that now the top five-year fixed bond pays almost half that of the top deal seen a year ago.”
Ms Springall explained the top one-year bond currently pays 0.80 percent gross from Tandem Bank.
This is likely to disappoint savers who are on the look-out for higher returns for their cash.
However, it may be sensible to lock in deals now, to avoid further disappointment if rates sink further in 2021.
Ms Springall concluded: “There will be savers who have accumulated some disposable income this year, and if they have not reviewed their savings account, now is the time to do so as the market remains unpredictable.
“A good deal does not last for long, and so it is wise for savers to keep a close eye on the market and act quickly to be in with a chance to secure a top rate.”
As the central bank held its base rate at 0.1 percent today, Sarah Coles, personal finance analyst at Hargreaves Lansdown also commented on the savings climate.
She said: “Savers shouldn’t pin their hopes on a rise in interest rates. Extra covid restrictions mean this winter has been even tougher than the Bank of England expected, and while it’s hopeful of some kind of recovery later in 2021, it doesn’t expect to raise rates for two years
“We should all have three to six months’ worth of essential expenses in a competitive easy access account, but after that, it’s worth considering fixing any cash you won’t need in the immediate future for the periods that suit your needs, and locking in a better rate.
“If inflation unexpectedly falls, the Bank of England says it will ‘take whatever additional action is necessary’. Lurking within the phrase is the fact that while negative interest rates are a dim and distant outside possibility, they haven’t been taken off the table entirely.”
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