The average savings rate has broken the 1% barrier for the first time since before the Bank of England cut the base rate to 0.5% – but rising inflation still threatens savings.
Savers can smile a little as increasing competition has led easy-access savings to hit an average of 1.04% – the highest rate for almost two-and-a-half years.
New deals from banks and building societies pushed the average up from 0.9% at the beginning of July to its new high as they battle to attract savers and increase deposits.
Leading the charge is a new 3.11% easy-access offering from Derbyshire Building Society, while five other providers all pay above the 3% mark – with most of the top deals launched within the last two months.
Building societies especially are having to fight harder as they face stiff competition from new products such as the National Savings & Investments index-linked certificates which pay 0.5% above the rate of inflation as determined by the Retail Prices Index (RPI) – effectively beating inflation.
But increased inflation and the rising cost of living has also taken its toll on the ability of people to save. The most recent statistics from the British Bankers Association (BBA) show that the amount of money held in savings accounts at UK banks rose by £6.1 billion in the first six months of 2011 – compared to £15.9 billion over the same period last year.
Moneyhighstreet says: “This is good news for savers who want a better return on their money, but still want access to their money when they need it.
“The problem for many savers is that at the moment they’ll have to lock their money away if they want to have a chance at beating inflation.
“Savings rates aren’t likely to be pushed too much higher until the Bank of England raises the base rate from its current 0.5% level. But as the UK economy continues to struggle, this event looks more and more distant, with some analysts predicting that it won’t happen until at least a year from now – and even then the increase may not be dramatic.”