Fall in inflation offers boost for savers

A handful of longer-term fixed rate savings accounts are now matching or beating inflation following the fall in the Consumer Price Index (CPI) this week.

The drop in CPI to 2.5% on Wednesday means several five-year bonds were looking more attractive to savers willing to lock their cash away, analysis by Moneyfacts has revealed.

These include a monthly interest five-year bond from Vanquis Bank offering interest at 2.62%.

According to Moneyfacts, inflation continued to have an impact on the true spending power of savers’ cash, but now it had fallen to a level where longer-term savers could beat its impact.

And it recommended monthly interest accounts as a way for consumers to boost their savings income.

Rachel Springall, finance expert at Moneyfacts, said: “These accounts are useful for those who want to invest their deposit in a way that sees the interest earned continue to grow, rather than just on the account’s anniversary.

“Savers can then choose to reinvest their earnings, so that interest then applies to the total balance amassed.”

Moneyfacts warned there was a lack of choice when it came to monthly interest accounts. It said savers might find they paid lower rates than could be achieved in other areas of the market.

And it advised savers to check out the challenger banks, which were more likely to offer monthly interest accounts.

Rachel Springall added: “Thankfully, as a whole, savings rates are on the up, and with the continued murmurings of a base rate rise this year, it is expected for the market to move into a positive direction.”

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