Savers search for better deals as inflation rate stagnates
The UK inflation rate remained unchanged at 0.6 per cent in August, according to official figures released today, despite the base rate cuts earlier that month and the weaker pound.
This follows evidence from Hargreaves Lansdown that shows savers are searching for more attractive interest rates. The fund supermarket saw a 50 per cent increase in the number of cash ISA transfers to HL stocks & shares ISAs in August 2016, compared with August 2015, as retail investors seek out new opportunities to grow their cash.
This may lead to a surge of interest in the peer-to-peer sector, which has been producing above-average returns over the past few years regardless of the inflation and base rate changes.
Analysts had expected to rise to 0.7 per cent in August, largely due to the rising cost of raw materials such as food and petrol, and the falling value of the pound. However, these expenses were offset by cheaper hotel accommodation, alcohol and clothing.
Last week the Bank of England released the results of its quarterly inflation attitudes report, which found that in August, members of the public believed the current rate of inflation to be 1.8 per cent, three times higher than the actual figures.
“The majority of savers have virtually given up on the prospect of an interest rate rise any time soon, never mind a return to pre-crisis levels,” said Kevin Caley, founder and chairman of P2P lender ThinCats.
“The recent slashing of savings rates we saw in August, across more than 300 accounts, will have been a hard pill to swallow for many people, especially those who have put money away for most of their lives and were hoping to get a reasonable income in their later years through savings.”