Inflation rises to 2.10% and is above the Bank of England's target for the first time in 2019

Author: Anna Bowes
31st May 2019

Ofgem's new higher energy price cap sparked an unwelcome jump in inflation in April 2019, according to the latest figures from the Office for National Statistics (ONS).

 

 

 

The latest figures, revealed on 22nd May, show that the Consumer Prices Index (CPI), which is a measure of how quickly the price of items that we use the most  is rising, stood at 2.10% in April, up from 1.90% in February and March.

According to the ONS, higher energy bills was a key reason for the jump, along with an increase in the cost of filling up the car on the forecourt and flights – as Easter was a bit later this year and as a result saw airlines increasing prices by 26% due to the holiday demand.

These price increases were partly offset by cheaper computer games and package holidays and competition among clothing retailers helped to keep prices down.

While we always say that inflation is personal - after all not everyone drives or buys computer games - unfortunately the increase in cost to our gas and electricity will probably have been felt by the majority, although luckily we are now heading into warmer weather.

CPI is now above the Banks of England’s target of 2% and what this means for savers is that there are fewer accounts that pay a rate of interest that matches or beats inflation – especially if they pay tax on the interest they earn.

When inflation was at 1.90% there were over 190 accounts that savers could have used to offset the damaging effect of inflation – but with the hike in the CPI in April, this number has dropped.

That said, there are still over 100 accounts that pay 2.10% or more (before tax), although you’d really need to tie up your cash for at least 12 months – read on for more details on the top-paying accounts currently available.

However, even if you can’t tie up your money, it still makes sense to choose the best accounts you can, to at least mitigate inflation. If you don’t and you leave your cash languishing in a really poor paying account, the value of your money will erode more quickly. It goes without saying that earning 1.50% AER on the best easy access account is much better for your financial health than earning 0.15%.

With an inflation rate of 2.10%, a deposit of £10,000 would be worth £9,081 in real terms, after five years if you were to earn just 0.15% AER.

However, if you switched to a better paying account and earned 1.50%, although the real value would still be less, your £10,000 would be worth £9,710 – so would have lost £290 value rather than £919.

Provider Account Name Gross Rate 
Current Accounts
TSB Student Bank Account 4.89%
TSB Classic Plus Account 4.89%
Nationwide FlexDirect Account 4.89%
One year fixed term accounts
BLME 1 Year Premier Deposit Account 2.20%
Al Rayan Bank 12 Month Fixed Term Deposit 2.15%
Two year fixed term accounts
Al Rayan Bank 24 Month Fixed Term Deposit 2.40%
BLME 2 Years Premier Deposit Account 2.40%
Atom Bank 2 Year Fixed Saver 2.30%
Three year fixed term accounts
Gatehouse Bank 3 Year Fixed Term Deposit 2.55%
BLME 3 Years Premier Deposit Account 2.50%
Secure Trust Bank 3 Year Fixed Rate Bond (17.June.2022) 2.40%
Four year fixed term accounts
Secure Trust Bank 4 Year Fixed Rate Bond (16.Jun.2023) 2.50%
BLME 4 Years Premier Deposit Account 2.50%
PCF Bank 4 Year Term Deposit Issue 7 2.40%
Five year fixed term accounts
Gatehouse Bank 5 Year Fixed Term Deposit 2.75%
BLME 5 Years Premier Deposit Account 2.70%
Secure Trust Bank 5 Year Fixed Rate Bond (17.Jun.2024) 2.60%
Six/Seven year fixed term accounts
BLME 7 Years Premier Deposit Account 2.75%
Secure Trust Bank 7 Year Fixed Rate Bond (17.Jun.2026) 2.70%
PCF Bank 7 Year Term Deposit Issue 9 2.60%

Rates correct as at 29 May 2019

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