Fewer savings accounts now beat inflation compared with the previous month after the latest inflation figures were released, which means savers will need to act imminently to take advantage of the best savings rates.
It comes after a surprise rise in the consumer price index (CPI) measure of inflation from 3.9% in November to 4% in December, new data by the Office for National Statistics (ONS) reveals.
For savers, this news isn’t welcomed as it means fewer savings accounts are keeping up with the rate of inflation. According to Moneyfacts, there are 967 inflation-busting savings accounts currently on the market- that’s 160 fewer accounts than in December.
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That said, this is a golden opportunity for savers to switch to a higher paying savings account while they are still on the market, as around 400 billion pounds are sitting idle in UK current and savings accounts, earning 1% interest or below, new data from Yorkshire Building Society and data consultancy CACI reveals.
MoneyWeek has been tracking savings accounts, and you can still earn over 5% on some of the top accounts.
Find out which lenders are offering inflation-busting savings rates and why you need to act fast to get them.
Inflation-busting savings accounts
December’s slight rise in inflation is owed mostly to the costs of alcohol and tobacco, plus recreational and cultural goods and services.
As a result, there are now 967 inflation-busting savings accounts on the market (at the time of writing). Here’s how the data from Moneyfacts compares to the previous month.
| Type of account | Number of savings accounts that beat inflation in December | Number of savings accounts that beat inflation today | Difference in inflation-busting savings accounts available |
|---|---|---|---|
| Easy-access savings | 109 | 101 | -8 |
| Fixed bonds | 553 | 463 | -90 |
| Notice accounts | 135 | 124 | -11 |
| Easy-access ISAs | 84 | 72 | -12 |
| Fixed ISAs | 246 | 207 | -39 |
Fixed savings accounts show the biggest fall in the number of accounts available that beat inflation.
Though, this is not entirely shocking as James Hyde, spokesperson at Moneyfacts says: “We recently saw the highest month-on-month drop to fixed savings rates in 15 years.”
MoneyWeek has been tracking the best savings deals and has found already this year, 21 providers have dropped the rates on one-year fixed accounts, and four deals have been pulled- including the top paying 5.66% saver by Metro Bank.
Right now, here are the top rates you can earn on your savings:
| Type of account | Provider | Rate AER | Minimum deposit |
|---|---|---|---|
| Easy access savings | Cahoot | 5.2% | £1 |
| One year fixed bond | SmartSave | 5.31% | £10,000 |
| Notice account | United Trust Bank | 5.58% | £5,000 |
| Easy access ISA | Moneybox | 5.09% | £500 |
| One year fixed ISA | Virgin Money | 5.25% | £0 |
The good news is, the top rates still stand above 5%. But as rates continue to fall daily, you will need to act fast to bag the best savings deals.
Why savers need to act fast
Since the Bank of England froze interest rates for the third time at its latest meeting at 5.25%, savings rates have been pushed down.
Sarah Coles, head of personal finance at Hargreaves Lansdown says: “savings rates had already reacted to expectations of lower inflation and rate reductions from the Bank of England, so fixed rates have been falling.”
Deals continue to drop in rate in the new year, and lenders are even pulling best buys.
But Hyde puts emphasis on savings deals offered by challenger banks. “Despite many providers across the sector significantly cutting rates in recent weeks, challenger banks have continued to occupy the top positions in the charts.”
Whilst this was the case in December, challenger banks have pulled their top deals in the new year. Just yesterday (17 January) we saw Metro Bank drop the rate on its easy access saver from a top-paying 5.22% to 4.51% AER.
Plus, on 3 January 2024, Metro Bank pulled its best buy 5.66% one-year fixed saver due to popular demand.
“These providers are often able to offer very competitive deals, however their readiness to pull top rates once targets have been hit means it’s imperative to strike while the iron is hot to secure the best deal,” Hyde adds.
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