"Loyalty not incentivised": Inflation outpaces average savings rates in 2025 - as consumers given 'shop around' advice
Inflation has outpaced the average savings account rate this year, new analysis has found.
Moneyfactscompare.co.uk analysis found the average savings rate this year has been 3.5 per cent – 0.5 per cent lower than average inflation.
However, the fall to 3.2 per cent in November in the Consumer Price Index took inflation below the current average savings rate of 3.39 per cent.
Caitlyn Eastell, Spokesperson at Moneyfactscompare.co.uk, said: “This year inflation has averaged 4.01 per cent and the Moneyfacts Average Savings Rate at 3.50 per cent, meaning cash savings have failed to keep pace.
"For someone with £10,000, this equates to being around £50 worse off in real terms. However, the Office for Budget Responsibility (OBR) forecasts inflation will average around 2.5 per cent in 2026 and if savings rates stayed the same savers would gain £100 in real terms.
“It’s as crucial as ever that savers now pay closer attention to how to get their money working its hardest. Inflation remains one of the biggest threats, however, fiscal drag also plays a major role.
"The income tax threshold freeze could haul millions of consumers into higher tax brackets and subsequently receiving a surprise tax bill as their personal savings allowance is halved from £1,000 to £500.
"Although the interest rates offered on cash ISAs are typically lower than their non-ISA counterparts, they may be more favourable in the long run as all interest earned is tax-free.
“Loyalty is not always incentivised, and one in four savers are missing out because they have never switched savings accounts. The markets are most generous to those who proactively search for the highest paying deals.”
It comes as mortgage rates continue to gradually decline. The Moneyfacts Average Mortgage rate has fallen from 4.94 per cent to 4.89 per cent.
Meanwhile, the average two-year fixed rate has fallen from 4.88 per cent to 4.82 per cent. The average five-year fixed rate has fallen from 4.93 per cent to 4.90 per cent.
In December 2023 the average two-year fixed rate was 6.04 per cent.
Ms Eastell said: “Although mortgage rates remain significantly higher than the ultra-low levels seen in previous years, lenders have been drip feeding cuts as inflation eases, fuelling speculation for a base rate cut.
"The most recent GDP figures only add fuel to the fire. In December 2023 the average two-year fixed rate was 6.04 per cent and the ‘typical’ borrower could expect a monthly repayment of around £1,600. Remortgage customers could now see their repayments drop by almost £180, which will ease a significant burden. However, for first-time buyers higher borrowing costs continue to limit their purchasing power.”