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Inflation dips to 2.5% in December – how to find the best savings accounts
Rates on top savings deals up slightly month-on-month
Inflation unexpectedly dipped to 2.5% in December, Office for National Statistics (ONS) data shows. It's the first time the rate has dropped in three months.
The Consumer Price Index (CPI) figure eased from 2.6% in November, thanks in the main to falling restaurant and hotel prices.
If you're looking for an inflation-beating savings account, the good news is that rates on some top accounts have risen over the last month, bucking the recent trend of falling rates.
Read on to find out which accounts offer the best returns on your money, and for more on the reasons behind the rise in inflation.
The best inflation-beating savings accounts
Our analysis of Moneyfacts data shows the number of savings accounts with rates that beat inflation is up slightly on last month.
There are currently 1,862 savings accounts (88% of all products) offering rates above 2.5%. This includes instant access and variable-rate deals, fixed-rate bonds and Isas. This figure is a little higher than a month ago, when 87% of accounts beat inflation.
Two years ago, when December's inflation stood at 10.1%, there were no savings deals that beat inflation.
This table shows the top rates currently available on fixed-term and instant-access cash Isas and savings accounts, ordered by term.
| Instant access | GB Bank | 4.86% | n/a | £500 | Mobile app | Daily |
| Instant access Isa | Trading 212 | 4.9% | n/a | £1 | Internet, mobile app | Daily |
| One-year fixed rate | Vida Savings | 4.77% | n/a | £100 | Internet | Monthly, yearly |
| One-year fixed rate Isa | United Trust Bank | 4.54% | n/a | £5,000 | Internet | On maturity |
| Two-year fixed rate | Atom Bank | 4.7% | 71% | £50 | Mobile app | Monthly, yearly |
| Two-year fixed rate Isa | Kent Reliance | 4.44% | 74% | £1,000 | Branch, internet | Monthly, yearly |
| Three-year fixed rate | Hodge Bank | 4.61% | n/a | £1,000 | Internet | Monthly, yearly |
Table notes: rates sourced from Moneyfacts on 15 January 2025 and based on a balance of £1,000. Provider customer score is based on savers' overall satisfaction with the brand and how likely they are to recommend it to others. n/a means sample size was too small for us to generate a provider score
- Find out more:best savings accounts 2024
How savings track against inflation
It's important to choose an account with a rate higher than the current CPI figure. If the interest rate on your account is below inflation, your savings will effectively lose value over time.
This table shows how average savings rates compare to inflation since August 2020, using data from Moneyfacts:
As you can see, average rates on one-year and longer-term bonds have beaten inflation since October 2023, with average instant-access rates not rising above inflation until April 2024.
- Find out more: the different types of savings accounts
What's happening to savings rates?
There's good news for savers this month, as interest rates on some accounts have defied expectations and begun to improve.
The best rate on a five-year fixed rate bond has risen from 4.52% AER to 4.55% since the last inflation announcement on 18 December.
Those looking to maximise their returns in the short-term will also be pleased to discover that the top rate on an instant-access account has gone up from 4.75% AER to 4.86%. That's despite the average instant-access rate falling from 2.95% AER to 2.89%.
Isa rates have also seen a small boost. The leading rate on a one-year Isa has increased from 4.52% AER to 4.54%, while the best five-year Isa rate now stands at 4.2% AER, up from 4.18%. You can also still grab an instant-access Isa paying almost 5% AER.
Further base rate cuts could bring lower returns
Overall, savings rates have been falling in the last few months, and this is partly down to the Bank of England (BoE)'s move to start cutting the base rate.
A base rate cut matters to savers because banks often respond by reducing the interest paid on savings accounts. Variable rate products, such as instant-access accounts, are usually hit first.
The BoE decided to hold the base rate steady on 19 December, which could explain why some savings rates have become slightly more attractive this month.
However, further base rate cuts are likely as 2025 progresses, so if you're shopping around for a new account you may want to consider locking your money away in a fixed-term account for guaranteed returns.
- Find out more: best savings accounts 2024
Why has inflation fallen?
Economists had expected inflation to remain unchanged, but a drop in the price of restaurants and hotels helped push inflation down. Inflation on these items fell to its lowest level since July 2021.
A reduction in the price of alcohol and tobacco, as well as clothing and footwear, also helped drive inflation down in December. However, households were hit by the rising cost of fuel and second-hand cars.
While the CPI figure is significantly lower than the peak of 11.1% seen in October 2022, it remains above the Bank of England's target of 2%.
It's important to remember, too, that even when inflation is at the Bank of England's target level, this doesn't mean prices are going down; it just means they're rising at a slower rate than before.
