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Inflation falls to lowest level in almost 4 years – how to find interest rates to beat it

Inflation’s dropped from 1.5% in March to 0.8% last month (ONS). Is it time to lock in on those inflation-busting interest rates?

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

We’ve all heard stories from our parents and grandparents about how “cheap” things were back in their day.

Inflation is the general rise in prices of the things we pay for every day. It’s the reason we can’t buy a loaf of bread for a few pennies like our parents or grandparents did.

Inflation means our cash today doesn’t have the same buying power tomorrow. Over time this really adds up and it can be a killer for our long-term wealth.

Beating inflation

The Office for National Statistics (ONS) recently announced the latest inflation figures – it fell to 0.8% in April, the lowest level since August 2016.

The best way to fight inflation is to make sure your cash is working as hard as it can. For example, if inflation is 1% and you can get interest rates on your savings of 2%, you’re better off.

Until recently finding interest rates that can match or beat inflation has been tricky. But because inflation has dropped from 1.5% in March to 0.8% last month, it means the struggle to find inflation-beating rates has now become a walk in the park.

But unfortunately, far too many people will still fall short.

But aren’t interest rates falling too?

Most people have their savings in instant access accounts. But while most competitive accounts currently beat inflation, lots of savers don’t have their money in them. Instead, many of us have our instant access savings with the high street giants which pay some of the lowest rates – down to just 0.01% on some instant access accounts.

Moving emergency cash (about 3-6 months’ worth of living costs) to a competitive easy access account is a great start. But for any additional savings that you don’t need immediate access to, think about getting them in a mix of fixed-term products.

Savings rates have been dropping, and we probably haven’t seen the last of the rate cuts, so they won’t stay above inflation forever.

Putting a portion of your savings into fixed term products means you can get a better rate. You also lock that rate in, which can be great in times of falling rates. Remember though, if rates rise, you'll miss out. The interest on these accounts has also been gradually cut over the past few months, so if you want to fix, it’s probably best to do so sooner rather than later.

But the trade off with fixed term products is that you usually can’t get access to your money until the product matures. So you shouldn’t put money that you think you’ll need before then in them. For example, if you know you have a big expense due in 12 months’ time, you won’t want to tie your money up in two or three year fixed term savings products.

How much better off could you be – try our calculator

How we can help

It’s a pain to hunt out the best deal and go through the effort of applying to different providers. It usually means a lot of paperwork, new security information and having to prove who you are every time.

But Active Savings can help.

Active Savings lets you pick and mix easy access and fixed term savings products from a range of banks and building societies, all through one online account.

It cuts out the hassle involved when opening and managing savings products with multiple providers once you have an Active Savings account. There’s competitive rates on offer, such as 0.75% (AER/Gross*) on easy access and 1.35% (AER/Gross) on a 1-year fix.

Once you’re set up with Active Savings you don’t have to fill in any further application forms when you want to select new products. And it’s easy to manage, allowing you to see all your savings alongside your other Hargreaves Lansdown investments within your online account.

Get a £25 bonus

If you open an Active Savings account by 17 June, add £5,000 or more by debit card and provide us with an instruction as to where you would like to save within 60 days, you could qualify for a £25 bonus as a thank you. All we ask is you then keep your Active Savings balance above £5,000 for 6 months. Full terms are in the link below.

Find out more

See full terms

This article isn't personal advice, so you need to be comfortable with making your own decisions. Remember inflation reduces the future spending power of money.

Products available through Active Savings can be added or withdrawn at any time. Minimum deposit requirements apply to individual products. Instant access products allow immediate cash withdrawals. Active Savings offer easy access products where withdrawals usually take one working day.

*AER (Annual Equivalent Rate) shows what the interest rate would be if interest was paid and compounded once each year. It helps you compare the interest rates on different savings products.

Gross means the interest rate without any tax deducted. Interest is paid gross. You’re responsible for paying any tax due on interest that exceeds your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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