A savings expert has warned Brits that now might be a good time to check their rate and compare it to what’s available across the market. It comes as August’s inflation rate was recently announced, a figure expected to inform the Bank of England’s base rate decision this week. With inflation back just above 3%, the Monetary Policy Committee, which is responsible for maintaining monetary stability by keeping inflation low and stable, will decide what level of Bank Rate is needed to return inflation to the 2% target over time.
Inflation rose to 3.1% in August, and for mortgage borrowers, that means fixed mortgage rates may not fall as quickly as previously hoped. And for savers, they may benefit if interest rates remain elevated. However, now is the time to check if their returns are keeping pace with what else is available. Multiple savings experts have previously warned of huge amounts of money sitting in savings accounts that are earning well under the average rate on the market, with people potentially losing hundreds in earnings.
“Inflation ticking up to 3.1% is not a disaster, but it is the wrong direction, and the timing matters,” he said. “The Bank of England has been carefully managing expectations around rate cuts, and a number like this makes the next move harder to call. Markets will be pricing in a longer hold, possibly into next year.”
He added: “For savers, it is a more nuanced picture. Rates on savings accounts have softened as markets anticipated cuts, but with inflation back above 3%, the real return on cash is being squeezed again. It is worth checking whether your savings rate is actually keeping pace.”
It revealed that the majority of UK consumers’ savings are currently held in easy-access accounts, with a total of £911 billion kept in them. These accounts pay an average interest rate of just 1.6%, according to Bank of England data.
But the average rate on fixed-rate savings products is 3.7%, meaning savers could be earning a lot more by exploring a variety of savings options.
Sarah Coles, head of personal finance at AJ Bell, urged savers to check their rates and see whether they can earn higher returns by moving their money elsewhere.
