Inflation rate drops to 3.6 per cent, savers rejoice

Savers finally have a reason to celebrate, as the announcement that the consumer prices index has dropped to 3.6 per cent last month means that, for the first time in a long time, many savings accounts are actually offering real gains in their interest rates.

There are around 1,100 savings products currently available from providers of personal and business bank accounts.  Now, 47 of them offer rates that can break even or even exceed the nation’s inflation rate, even after tax is taken into account.

However, many savings experts say that the best bet for savers is an ISA, as the tax-free nature of these products allow savers to maximise their returns.  For those Brits paying a 40 per cent tax rate, ISAs are an excellent way to do so, as the only way to earn in excess of CPI inflation after the higher tax rate is taken into account is to find a taxable account with a 5.99 per cent rate of return – a target that is still sadly out of reach – yet savings tables report that there are 15 ISAs currently on the market that exceed 3.6 per cent in returns.

Savers have breathed a sigh of relief thanks to the drop in the inflation rate, as last month saw only eight savings products that carried the badge of ‘inflation-beating’ offerings.  This left all to many Brits with no choice but to watch the actual value of their deposits erode as inflation drove prices higher at a rate that outstripped their cash growth – and 20 per cent of Brits were so concerned about this issue that they reported actually postponing any savings activity until inflation receded, according to a recent survey.

The retail prices index, the nation’s other inflation measure linked to housing costs such as mortgage rates, also declined this month to 3.9 per cent.  Some savers prefer to use the RPI, especially home owners or those considering purchasing a new house.

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