Savings accounts still not good enough despite inflation drop Go compare with our comparison table

Savings accounts still not good enough despite inflation drop

16 June 2010 / by Lois Avery

Savers are still getting a raw deal despite inflation creeping down slightly this month, that’s the message from moneysupermarket.com

The Consumer price Index, which measures UK inflation, showed that the rate was 3.4 per cent in May, down from 3.7 per cent the previous month.

The slowdown is due to a slight fall in petrol prices and food costs last month but it is still way above the Government’s 2 per cent target.

And the high rate means savers are still getting a bad deal for their money, with traditional savings accounts and cash ISAs not paying high enough rates to offset the effects of inflation.

Kevin Mountford, head of banking at moneysupermarket.com, said: "It would be fair to say that 2010 has so far not been the year for savers. With low interest rates and rising prices, it is difficult for savers to keep a track of their finances to make sure they are getting the best return on their money.

“Unfortunately, with falling inflation also comes the reality that the Bank of England is unlikely to increase interest rates in the foreseeable future, so at the moment, things don't look to be improving.

"With rates so low it is critical that savers are vigilant and switch accounts as soon as their rate starts to drop. Any saver who opened their account more than one year ago is likely to be able to get a better rate by switching to a new account (with the exception of fixed rate bonds).”

The fall in inflation comes as the markets reported a rise in the pound against the dollar. The pound rose by 2¼ cents against the dollar and strengthened against the euro, with shares in London also stronger.

This follows a report from the Office for Budget Responsibility that showed Britain’s finances to be better than previously thought. 

Although the OBR downgraded the official Treasury growth forecasts and increased its assessment of the size of the underlying budget deficit, it did not uncover any gaps in the public finances ahead of next week’s emergency budget. It also predicted growth of 2.8 per cent in the following two years.

To compare savings deals click here »

© Fair Investment Company Ltd