Savers eyeing higher rates face the need to move quickly as June’s consumer price index reading came in lower than expected on Wednesday.
Analysts have already tipped that lower-than-expected inflation in Wednesday’s reading for June could prompt a less drastic 25 basis point hike to UK base interest next month.
If this is the case, reluctant moves by banks to lift rates on savings accounts alongside mortgages could moderate soon after they’ve begun.
“Savers will have to move quickly to grab a top rate from such a volatile market,” Moneyfacts finance expert Rachel Springall commented.
“It is imperative they sign up to rate alerts and newsletters to keep on top of the latest changes to surface and move quickly to secure a deal to not be left disappointed.”
Markets no longer expect interest to climb above 6% as the Bank of England battles to bring down inflation, according to Charles Stanley (LSE:CAY) analyst Rob Morgan.
Given many banks have faced pressure to pass on rates to savers in line with rising base interest, lower-than-anticipated future hikes by the BoE could see this pressure eased in the coming months
“This is only one reading,” Morgan acknowledged, adding: “Inflation numbers can be notoriously volatile and the UK is by no means out of the inflation woods”.
Further woes come from the fact banks’ interest rates have failed to match inflation, meaning savers face real-term losses on the value of savings accumulated in accounts.
“For savers, the increase in interest rates has been a welcome tonic compared with the dreary returns of much of the past decade,” Morgan added.
"However, even the most competitive accounts pay significantly less than headline inflation meaning that the spending power of cash is stuck in reverse gear."