Savers lose in­ter­est as easy-ac­count rates beaten by in­fla­tion

The Daily Telegraph - Business - - Front Page - By Mar­i­anna Hunt and Tim Wal­lace

JUST one easy-ac­cess sav­ings ac­count now beats in­fla­tion in a blow for mil­lions of Bri­tish fam­i­lies af­ter price rises picked up.

In­fla­tion as mea­sured by the con­sumer prices in­dex rose by 1pc in July, up from 0.6pc the pre­vi­ous month, af­ter a jump in ice cream and hair­cut costs as de­mand surged from cus­tomers cel­e­brat­ing lock­down free­dom.

The only ac­count on the mar­ket with a higher rate than this is of­fered by the Na­tional Sav­ings & In­vest­ment Bank (NS&I) and pays in­ter­est of 1.16pc.

Ev­ery other easy ac­cess ac­count open for new cus­tomers pays less, mean­ing fam­i­lies us­ing them will suf­fer a real-terms drop in the value of their cash. It fol­lows more than a decade of woe for savers since rates were crushed by the fi­nan­cial cri­sis.

The sur­prise in­crease in in­fla­tion means that the Bank of Eng­land could pause any fu­ture plans to cut in­ter­est rates or print more money, in case fur­ther ac­tion stokes de­mand and pushes prices back up to or be­yond the 2pc tar­get. It is likely to quell spec­u­la­tion of a move to con­tro­ver­sial neg­a­tive rates, where banks are charged for de­posit­ing money.

NS&I dom­i­nates the list of top-pay­ing easy-ac­cess ac­counts, also of­fer­ing the sec­ond and third best rates on the mar­ket of 1pc and 0.8pc.

How­ever, even these will not grow savers’ money in real terms and some peo­ple have re­ported prob­lems of slow ser­vice and de­lays as new cus­tomers have flocked to open ac­counts with the state-owned sav­ings bank.

The av­er­age in­ter­est paid by an easy­ac­cess ac­count has fallen by al­most two thirds since March, from 0.56pc to 0.22pc, mean­ing most of the cash sit­ting in these flex­i­ble ac­counts will now be los­ing value in real terms.

In­fla­tion rose af­ter lock­down as fam­i­lies made the most of new op­por­tu­ni­ties to spend.

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