“You could still lead an army of overweight elephants through the gap between inflation and saving rates.”
Inflation rates hit double digits for the first time in forty years last week, base rates increased to 1.75 per cent earlier this month and now, unsurprisingly, savings rates are continuing to rise.
Following the historic 0.5 per cent base rate increase from the Bank of England, 12-month rates are now topping 3 per cent, with the best rates sitting at 3.15 per cent.
Allica Bank, Paragon Bank and Shawbrook Bank are among the 10 banks that have upped their rates above 3 per cent, according to Hargreaves Lansdown, as rates are expected to keep creeping up.
“Higher inflation is bad news for savers, because despite recent rate bumps, you could still lead an army of overweight elephants through the gap between inflation and saving rates,” Hargreaves Lansdown acting head of savings Tom Higham said.
“It means the spending power of our money is being gradually eroded by higher prices, so we need to ensure we’re getting the best possible rate on each slice of our savings.”
Allica is currently sitting at 3.05 per cent on a 12 month bond, with Shawbrook and Paragon both at 3 per cent on 18 month bonds.
According to Hargreaves Lansdown, rates are expected to keep rising as banks vie for position with the best rates.
Inflation is also forecast to hit 13.1 per cent this autumn, so the pace looks set to continue.
It is “highly likely” rates will rise further over the year, bringing with this higher interest rates, according to Higham.
While the rates are still nowhere close to matching up with the rate at which inflation is rising, it at least goes some way towards closing the gap.
“You can’t keep pace with inflation in any savings account right now, but there’s a world of difference between it languishing in an account with a high street giant paying 0.01 per cent, and switching it to a bank offering almost 2 per cent,” Higham said.
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