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‘Sweet spot’ for savers as hundreds of accounts now pay double inflation

piggy bank
piggy bank

Savers should take advantage of a “sweet spot” in the market as sticky inflation keeps rates higher for longer.

Inflation, which had peaked at more than 11pc in October 2022, fell to 2.3pc in April, close to the Bank of England’s target of 2pc.

The higher than expected inflation rate pushed out plans for a Bank Rate cut from 5.25pc to the autumn, with British markets not expecting a drop until at least September.

As a result, savers can now achieve at least double the rate of inflation on almost half of savings accounts on the market.

There were 818 savings accounts which pay 4.6pc or more – twice the inflation rate – on the market as of Friday, according to financial analysts Moneyfacts. This represents 47pc of the 1,732 qualifying saving accounts.

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A pot of £50,000 in a one-year fix at 4.6pc will earn £2,535.57 over the course of the term, if interest is compounded daily. This is a real earning of £1,190.28 against an inflation rate of 2.3pc.

The top one-year fix is currently 5.17pc, while savers willing to put their money away for two years can achieve 5.05pc with RCI Bank.

There are currently three easy-access accounts offering more than 5pc, with Oxbury, Monument and Hoist Finance, through savings platform Raisin. For longer-term fixes, the best rate on offer on Friday was 4.75pc.

Savings experts said stickier than expected inflation spells good news for savers.

Laura Suter, of investment platform AJ Bell, said: “With plans of a June interest rate rise now firmly on the backburner, it looks like we’ll have a summer savings sweet spot, where inflation ticks lower but interest rates still look decent.”

Sarah Coles, of broker Hargreaves Lansdown, added: “Given that the Bank of England expects inflation to be 2.6pc in a year’s time, and 1.9pc in two years’ time, it means you could still effectively lock in a rate that could end up being double inflation for the next two years.”

But the offers will not last forever, experts warned, as the Bank Rate is expected to fall from the autumn.

James Blower, of comparison website Savings Guru, said: “Easy-access rates are already falling, anticipating cuts, and there’s only one provider paying 5pc or more for easy access and we expect 5pc plus rates to be a thing of the past by the end of this month.”

The Bank of England has held the Bank Rate at 5.25pc since last August, following 14 consecutive rises from December 2021.

The next meeting of the independent committee will be held on June 20, two weeks to the day before the election.