Hard-pressed savers can finally beat inflation with a number of accounts, but there is a huge catch.
UK consumer price inflation fell last month to 2.5 per cent, the lowest rate in a year according to the Office for National Statistics.
This fall from 2.7 per cent in February means some savings accounts in the independent This is Money tables now finally beat inflation once more.
Sunnier times? CPI has fallen to 2.5% and it means savers can beat inflation
The stipulation, however, is that savers who want to beat inflation with an ordinary savings account have to fix for five years – or until 2023 – to do so.
Fixing for five years with a lump sum of £10,000 with the top 2.65 per cent rate would give a saver a return of £1,415, according to our lump sum calculator.
No three-year fixed account beats inflation. The top rate is 2.31 per cent from RCI Bank.
No accounts in the fixed-rate cash Isa front beat inflation either, not even the top five-year fix which is 2.25 per cent from Halifax.
Appetite for savers to fix for five years is likely to be slim, especially as the chances of an imminent rate rise appear high.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, says: ‘Savers have been long overdue some good news.
‘After dismal conditions for far too long in the savings market, the sun is finally starting to shine.
‘However, like in a North-facing garden with very high hedges, the sun has only reached one small corner of the savings market.
‘To beat inflation you would have to tie your money up for at least five years. This has thrown many savers into a quandary.
‘With rates rises now widely predicted in May and a period of very gradual rises expected over the next few years, they don’t know whether to fix for five years now and beat inflation, wait to fix after May in the hope that fixed rates will rise, or whether a five-year fix is the right answer for them at all.’
‘The problem is that we cannot predict inflation and interest rates accurately over this kind of period, which makes it very difficult to objectively calculate the best option.’
Easy-access savings accounts are a long way off from offering inflation-busting rates, with the top deal paying 1.35 per cent from ICICI Bank.
THIS IS MONEY’S FIVE OF THE BEST SAVINGS DEALS