UK savings rates rise, but still lose out to cost of living

We pick short-term accounts and Isas that sould give you a return nearer the inflation rate

Interest rates on savings accounts are finally starting to creep upwards, but savers are still losing more to inflation than they are earning from interest, according to Moneyfacts.

The financial data analysts said this week that rates across the savings market have risen for 13 consecutive months, and are continuing to outweigh cuts.

However, before you break out the champagne (or should that be cava?), rates remain pitifully low compared with historic normal levels, and don’t come close to the 3% inflation rate.

This week, Nationwide launched a five-year fixed-rate Isa. This matches the other top-paying accounts over five years, but is still at just 2%. Putting money into this will look a poor decision if the Bank of England starts raising base rates as expected. PCF Bank has a two-year fixed-rate bond paying 2.05% – although there is £1,000 minimum deposit.

Probably a better bet for those with cash to deposit is a short-term account, and hope rates start rising. Tesco bank is currently paying 1.3% on its no-notice interest saver with a £1 minimum deposit.

If you prefer a cash Isa, consider Marsden building society which is paying the top rate – 1.3%. There is a minimum opening deposit of £5,000 and it allows transfers in from other providers. Savers can withdraw their money, penalty free, by 120 days notice. Virgin Money is paying 1.21% on its no-notice Isa.

If you are happy to lock your money away for 12 months, Atom bank pays 1.95% (min £50 deposit).

Rachel Springall, a finance expert at, says: “It’s great to see savings rates improving for yet another month, largely fuelled by competition amongst the challenger banks. But there are still quite a few variable savings accounts paying less than 0.5%, with around half of the easy-access market failing to match this level. It’s really important for savers to shop around and consider one of the lesser-known brands.”


Miles Brignall

The GuardianTramp

Related Content

Article image
UK savings rates are tumbling – what can you do?
Frustration over choices is putting people at risk of scams but there are accounts worth considering

Rupert Jones

07, Aug, 2021 @9:00 AM

Article image
Why savings rates may be heading for zero – and what to do
With Britain’s leading providers cutting interest rates, things are not looking good for savers

Rupert Jones

07, Sep, 2019 @7:30 AM

Article image
With savings rates so low where should you put your extra cash?
Long-suffering savers have fewer accounts to choose from and some customers are being paid no interest at all

Rupert Jones

22, Feb, 2020 @7:01 AM

Article image
Isas: is fixed rate or easy access better as interest rates rise?
(Slightly) higher rates are on offer for tying up your cash for longer but in fact you’ll often do better with a non-Isa

Rupert Jones

19, Mar, 2022 @9:00 AM

Article image
Covid lockdown savings: how to make the most of spare cash
Options if you have accumulated some money or want to start putting something aside

Shane Hickey

19, Jun, 2021 @7:00 AM

Article image
Savings: Britons can switch to get up to 7% after interest rate rises
Loyal bank customers are not necessarily rewarded, so shop around for a better-paying account

Rupert Jones

03, Mar, 2023 @7:00 AM

Article image
Savings: instant access accounts slash rates after NS&I cut
Customers of easy access accounts and Isas move cash in search of a good deal

Rupert Jones

01, Dec, 2020 @7:00 AM

Article image
The best savings deals as NS&I slashes rates and Premium Bonds prizes
Millions of account holders face deep cuts from next month, but there are alternatives

Rupert Jones

25, Sep, 2020 @8:30 AM

Article image
Isa rates halved since Brexit vote and eroded further by inflation
Cash savers’ money is declining in real terms as interest rates and inflation head in opposite directions, say experts

Vicky Shaw and Rupert Jones

01, Apr, 2017 @6:00 AM

Article image
NS&I to slash savings rates and Premium Bonds prizes
Government-backed body to reduce returns on direct saver, investment account and Isas

Hilary Osborne

21, Sep, 2020 @10:32 AM