Savers across Britain are being urged to take advantage of competitive interest rates as they could "lose out", with over 1,500 savings accounts now beating inflation, following today's figures from the Office for National Statistics (ONS).
The consumer price index (CPI) rate for the 12 months to December 2024 rose to 2.5 per cent, a slight drop from 2.6 per cent the month before. Analysts are pricing in a likely base rate cut from the Bank of England next month.
Analysis from Moneyfactscompare reveals an extensive range of options for those seeking strong returns on their savings, including 216 easy-access accounts and 505 ISA products that outperform current inflation rates.
The surge in competitive ISA rates marks a significant improvement from January 2022, when no savings accounts were able to beat the then-inflation rate of 10.5 per cent.
Today's improvement in inflation figures has led to a substantial increase in the number of savings products offering above-inflation returns. Currently, 1,597 savings accounts beat inflation, including 181 notice accounts and 695 fixed rate bonds.
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Cash ISA interest rates continue to be competitive, research finds
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The Bank of England projects inflation to reach 2.7 per cent during Q4 2025, suggesting continued opportunities for savers in the coming months. Caitlyn Eastell, spokesperson at Moneyfactscompare, highlights a broad increase in cash ISA rates as the new tax year approaches.
"In the run-up to ISA season cash ISAs have seen rate increases across the board, with the top four-year fixed ISA being the exception," says Eastell. She emphasises the importance of utilising remaining ISA allowances before they expire, warning that savers "may lose out" if they fail to act.
Competition in the ISA market is expected to intensify in the coming months, presenting additional opportunities for savers with Britons looking to take advantage of tax-free accounts.
Eastell notes that easy access ISAs currently offer rates as high as five per cent, though she suggests fixed-term options might become more attractive as the Bank of England considers interest rate reductions.
Bank customers are looking for accounts that offer competitive returns
PexelsThe current savings market offers a diverse range of options, with easy access ISAs providing particularly attractive returns of up to five per cent, Moneyfacts highlights. The gap between different savings products has notably narrowed, with only a minor difference now separating easy access and notice accounts.
This shift means savers currently holding notice accounts may not be seeing significantly better returns compared to instant access alternatives, according to Eastell.
Fixed bonds currently show varying trends, with the leading one-year fixed bond experiencing a slight reduction, while the five-year bond rate has increased since the last inflation announcement
The narrowing gap between shorter and longer-term savings products suggests a transformation in the traditional savings market structure, though Eastell notes that a complete return to conventional patterns remains "in the distant future."
Easy access accounts have shown the most significant monthly improvement, with the top rate increasing by 0.14 per cent. Experts advise savers to act quickly to secure attractive rates before they disappear from the market.
"To avoid disappointment, savers would be wise to secure any enticing deals before they disappear," Eastell warns. Those considering their savings options are encouraged to carefully evaluate account restrictions and opening requirements.
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PA"If consumers are unsure which account is best suited to their needs, they should seek independent advice in the first instance," Moneyfactscompare's spokesperson recommends.
With inflation at 2.5 per cent and over 1,500 savings accounts beating this rate, she highlighted that savers have an unprecedented range of product options to choose from.
Savers are encouraged to act promptly to secure the best rates while they remain available, and to seek professional advice if uncertain about the most suitable savings strategy for their circumstances.
The Bank of England's next Monetary Policy Committee's (MPC) next meeting to discuss the trajectory of interest rates falls on February 6, 2025.
