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Inflation drops to 3.2% – how many savings accounts can beat it?
Inflation as measured by the consumer prices index (CPI) fell to 3.2% in March 2024, down from 3.4% the previous month.
That's according to data from the Office for National Statistics (ONS), which also shows CPI is at its lowest level since September 2021, when it was 3.1%.
Here, Which? explains why the inflation rate has eased, and which savings accounts and cash Isas can now help you beat it. We also share our advice for tackling continuing price rises.
Why has inflation eased?
This month's easing in CPI, which tracks the cost of an imaginary 'shopping basket' of around 700 popular goods and services, was mainly driven by falling food and non-alcoholic drink prices.
The overall cost of these items rose by 4% in the year to March 2024, compared to a peak of 19.1% last March – the highest annual rate seen for over 45 years. While bread and cereals saw the biggest price rises, meat and some bakery products, such as chocolate biscuits and crumpets, fell in price between February and March 2024.
The prices of furniture and household goods like cleaning products also fell by 0.9% in the year to March. But these lower costs were offset by rising fuel prices, with the average price of petrol rising by 2.6p per litre and the cost of diesel increasing by 2.8p per litre.
The graph below shows how inflation has changed since August 2020:
The Bank of England’s target is to keep inflation as close to 2% as it can, but it hasn’t been that low since July 2021. Before that, inflation was very low – below 2% from August 2019 to April 2021, falling to a low of 0.2% in August 2020 due to the pandemic’s impact.
Remember, even when there is a decrease in the inflation figure, it doesn't mean prices will fall as well – it merely shows they are rising at a slightly slower rate.
How many savings rates beat inflation?
This table shows the top rates for fixed-term and instant-access cash Isas and savings accounts, ordered by term.
| Account type | Account | AER/EPR | Terms |
|---|---|---|---|
| Five-year fixed-term savings account | Al Rayan Bank* 5-Year Fixed-Term Deposit (Raisin exclusive**) | 4.55% | £5,000 minimum deposit |
| Five-year fixed-term cash Isa | UBL UK 5-Year Fixed Rate Cash ISA | 4.16% | £2,000 minimum deposit |
| Four-year fixed-term savings account | Isbank Fixed-Term Deposit (Raisin exclusive**) | 4.5% | £1,000 minimum deposit |
| Four-year fixed-term cash Isa | UBL UK 4-Year Fixed Rate Cash ISA | 4.05% | £2,000 minimum deposit |
| Three-year fixed-term savings account | Atom Bank 3-Year Fixed Saver | 4.7% | £50 minimum deposit |
| Three-year fixed-term cash Isa | OakNorth Bank Fixed Rate Cash ISA | 4.39% | £1 minimum deposit |
| Two-year fixed-term savings account | iFAST Global Bank Fixed Term Deposit | 5.1% | No minimum deposit |
Source: Moneyfacts. Correct as of 17 April 2024, but rates are subject to change. *The account from Al Rayan Bank is Shariah-compliant and so pays an 'expected profit rate' (EPR) as opposed to an 'annual equivalent rate' (AER). **Deals marked (Raisin exclusive) are exclusively available through Raisin UK, which is a savings platform. Raisin offers savings accounts from a range of smaller or lesser-known banks and building societies. You'll deposit your money and manage your account through Raisin, rather than dealing directly with the provider. Deposits with all providers are protected by the Financial Services Compensation Scheme (FSCS), with the exception of deposits with AgriBank and HoistSavings, which are protected by the Maltese and Swedish deposit protection schemes, respectively. You can find out more about Raisin in our guide on savings platforms.
Thanks to another fall in the CPI figure, savers have even more inflation-busting deals to choose from. Moneyfacts data shows 1,364 savings accounts offer rates that beat inflation, including easy access, notice accounts, variable rate, fixed-rate bonds and Isas. That's around the same as last month, when 1,365 accounts offered higher-than-inflation returns last month.
It's quite the contrast from this time last year, when in April 2023, there were no deals that could beat the CPI rate of 10.1%.
Challenger and Islamic banks continue to offer the most competitive rates, with shorter-term fixed products offering the highest interest deals.
It's a particularly good time to open a cash Isa. The average one-year fixed Isa rate rose to 4.51% AER at the beginning of this month, while the average rate for an easy-access Isa rose to 3.38% – its highest point in more than 15 years.
Unfortunately, rates are less buoyant for other types of savings account. The average easy-access rate was 3.11% AER in April, down from 3.18% AER in March. Fixed-rate accounts are also seeing rate drops, although cuts are more modest than they have been in recent months. The average one-year fixed bond rate fell month-on-month by 0.01 percentage points to 4.6% AER in April, compared to a 0.25 percentage point drop between January and February 2024.
- Find out more: how to find the best savings account
How to cut costs when prices are still high
While the price of food and non-alcoholic drinks is dropping, the cost of grocery bills is still putting pressure on households. There are, however, some simple steps you can take to reduce how much you spend at the supermarket till.
A good place to start is to get picky about where you shop. Our monthly comparison of how much the UK's biggest supermarkets charge for a trolley of groceries, including everything from bread to toothpaste, can help you make the right choice. We found that Aldi was the cheapest overall in March 2024, followed closely by Lidl and Asda in third place. The most expensive was Waitrose. See how your favourite store compares.
We also have a guide on how to spend less at the supermarket, which is packed full of handy advice, from avoiding convenience stores to switching ranges. You might also want to consider getting a loyalty card from your favourite supermarket to unlock big discounts and other exclusive rewards. We have lots of advice to help you cut costs on your grocery shopping.
For drivers, a rise in the price of petrol and diesel will be a worry. To help, we've put together a guide full of practical tips on reducing how often you need to fill up, and where to go when you do.
