CONSUMERS have been dealt a new blow after the inflation rate increased to 2.9 per cent in August, which was higher than expectations.
Analysts had forecast a rate of 2.8 per cent, up from 2.6 per cent in July, but the figure means there is more of a struggle to find inflation-beating savings deals.
Inflation is now more than four times what it was this time last year, when the rise in the cost of living was recorded at 0.6 per cent.
Even mainstream providers are starting to suggest peer-to-peer lending as an alternative.
DIY investing platform Hargreaves Lansdown says there are now no instant access savings, fixed rate accounts or cash ISAs currently keeps pace with inflation.
Sarah Coles, personal finance analyst for Hargreaves Lansdown has suggested P2P could provide an alternative strategy to beat inflation, but has additional risks.
“This approach has garnered plenty of interest, because by by-passing the banks and lending direct to borrowers, savers can tap into some attractive returns,” she said.
“However, the way they are structured means they have additional risks over and above a savings account and are an investment.
“They rely on the individuals or companies they are lending to repaying their debts, and because we haven’t yet experienced a full normal market cycle while the P2P market has been up and running, it is difficult to quantify the effect of this added risk. For this reason, this approach has a long way to go before it can be considered mainstream.”
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The release comes ahead of the Bank of England’s latest interest rate decision, due tomorrow.
“The spike in prices is due to rising prices for clothing and petrol. The holiday season also saw a rise in air fares,” Maike Currie, investment director for personal investing at Fidelity International, said.
“The thorny issue of inflation will be the driving force behind any rate rise decision on Thursday. Economists have suggested that now is finally the time that the Bank takes a more hawkish turn, after eight and a half years of ultra-loose policy.
“Whether or not the Bank talks tough, there is little sign that markets are ready to buy it.
“In fact the difference in outlook between the bank and investors is becoming pronounced – despite the Bank’s repeated warnings about needing to raise rates sooner and faster than markets expect, markets are pricing in that they will stay at their current 0.25 per cent level until the end of 2018, and not rise above 0.5 per cent until 2021.”
Read more: How P2P can help consumers beat inflation