Headline UK inflation held at 2% in the 12 months to June. While it remains at the Bank of England’s 2% target, the battle against rising prices isn’t over yet in some areas such as services including restaurants and hotels.
Stubborn inflation in such areas has divided Bank of England economists on when to cut interest rates. Economists estimate the chances of a rate cut in August are now close to a third, and September looks more likely.
Savings providers have been keeping their ears to the ground. And despite savings rates remaining stable so far this year, it’s only a matter of time until rates fall.
As rate cuts loom, here’s how to get your cash working harder.
This article is designed to help you make your own decisions and isn’t personal advice. If your savings rate is lower than the rate of inflation, the future spending power of your money will reduce.
Savings rates are beating inflation
It’s been a good start to the year for savers.
Inflation has fallen, and savings rates remained high – with both easy-access rates and fixed rates holding up in June.
You can now get above double the rate of inflation returns.
It’s been driven by intense competition at the top of the market, as well as a stubborn Bank of England base interest rate. Savers should be taking full advantage while they can.
Is time running out?
As we get closer to a base rate cut, we’d expect easy-access rates to be cut swiftly.
It means if you can fix a good rate in now, you should consider it.
There are still multiple fixed rates across the savings market that offer returns around 5% AER*.
Rates don’t look like they’ll move up, so you’re unlikely to lose out if you fix now, Plus, you’ll continue to benefit for the duration of the term of your fix while you watch the rest of the savings market fall closer to inflation. Although of course nothing is certain.
Fixed rate products don’t let you withdraw your savings before the term ends so before you fix, think about when you need access to your savings and make sure you have enough cash set aside in easy access savings for your emergency fund.
If you’re working, we suggest three to six months’ worth essential spending – if you’re retired, one to three years is sensible.
Want your cash to work harder?
If you’re dreading the thought of searching for the best rates, or struggling to keep on top of savings accounts you have, our Active Savings platform could help.
You can access great, inflation-busting rates, from multiple banks, all through one online account.
*AER stands for Annual Equivalent Rate and show what the rate would be if interest was paid and compounded once a year. It helps you compare the rates on different savings products.
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The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.
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