The UK dipped into deflation for the first time in over 50 years as prices fell by -0.10% in the year to April 2015. But it was short lived. We're officially out of deflation as price rises have grown by 0.10% for the year to May.
If you have money languishing in poor paying accounts it's time to vote with your feet as with such low inflation, you have a chance to earn a real return on your cash at the moment. In our rates rundown you’ll see details of the latest deals to hit the market including market leading fixed rates paying up to 3.02% fixed for 5 years with Vanquis Bank. Or a simple easy access account paying 1.50% gross/AER with Birmingham Midshires. Better still, high interest paying current accounts from Nationwide and TSB are paying up to 5% AER on balances up to £2,500 and £2,000 respectively. Or for larger balances, Santander pays up to 3% AER on balances between £3,000 and £20,000.
There are over 900 accounts the match or beat inflation but what’s alarming is that there are almost 40 accounts which don’t, so are paying less than 0.10% and these are only those accounts that are still available to open! This includes the Flexible Saver from HSBC paying a ridiculous 0.05% (or 0.10% for advance customers, woohoo!). When looking at the whole market, including those long since closed for new customers, but with no doubt £millions languishing in them, there are over 100 accounts paying less than 0.10%. It’s hard to believe that even with such low inflation, some savers could still be losing money, in real terms.
Continued low inflation offers savers some respite while interest rates are at historic lows. One positive thing to note with a rise in inflation, is that it brings an increased possibility of a rise in the Bank of England base rate. Although it's likely that we’re still a little way off this yet, there are things savers can do now to take advantage of low inflation to boost returns.