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Inflation jumps to 2.2% in July – how many savings accounts can beat it now?
The CPI figure rises for the first time since December 2023
Inflation as measured by the Consumer Price Index (CPI) has jumped from 2% to 2.2% in July, thanks to household energy prices dropping at a slower pace than last year.
It's the first time inflation has risen since December 2023, according to data from the Office for National Statistics (ONS), and means the rate at which prices are rising is now slightly above the Bank of England's 2% target.
Here, Which? reveals which savings accounts and cash Isas can still help you beat inflation and takes a closer look at why inflation has jumped.
The best inflation-beating savings accounts
Savers looking for an inflation-busting deal are currently spoilt for choice.
Which? analysis of Moneyfacts data shows 1,826 products (that's around 94% of all accounts) now offer rates higher than July's CPI figure of 2.2%. That includes instant access, variable-rate deals, fixed-rate bonds and Isas.
Fixed-rate accounts offer the lion's share of deals with rates higher than the inflation rate (99.5%), while variable rate products have the fewest (88%).
This table shows the top rates for fixed-term and instant-access cash Isas and savings accounts, ordered by term.
| Five-year fixed rate | Al Rayan Bank (s) | 4.55% | £1,000 | Internet, mobile app | On maturity (compounded annually) |
| Five-year fixed rate Isa | UBL UK | 4.26% | £2,000 | Branch, internet, mobile app, postal | Anniversary, monthly, on maturity, quarterly |
| Four-year fixed rate | Oxbury Bank | 4.31% | £1,000 | Internet | Yearly |
| Four-year fixed rate Isa | UBL UK | 4.05% | £2,000 | Branch, internet, mobile app, postal | Anniversary, monthly, on maturity, quarterly |
| Three-year fixed rate | Sensible Savings | 4.7% | £5,000 | Internet, postal | On maturity (compounded annually) |
| Three-year fixed rate Isa | UBL UK | 4.51% | £2,000 | Branch, internet, mobile app, postal | Anniversary, monthly, on maturity, quarterly |
| Two-year fixed rate | Sensible Savings | 4.9% | £5,000 | Internet, postal | On maturity (compounded annually) |
Table notes: rates sourced from Moneyfacts on 14 August 2024. (a) 5.2% interest on balances up to £3,000 (s) This is a Sharia-compliant product, and so offers an expected profit rate (EPR) as opposed to an annual equivalent rate (AER).
It's important to choose an account with a rate higher than the current CPI figure: if interest isn't at the same rate of inflation or more, your nest egg will in effect lose value over time.
If we look back to August 2023, when the July CPI measure stood at 6.8%, there were no deals that could beat inflation.
Are savings rates falling?
Despite the huge number of savings deals that now beat inflation, rates on fixed bonds are slipping. It follows the decision by the Bank of England to cut the base rate from 5.25% to 5% on 1 August 2024 – this is usually bad news for savers, as banks often respond by reducing the interest paid on their savings accounts.
Average interest on a one-year fix has dropped from 4.65% AER to 4.63% since the last inflation announcement. While bonds lasting two or more years have seen average rates fall from 4.16% AER to 4.13%.
One of the few providers bucking that trend is the government-backed National Savings and Investments (NS&I), which increased the interest rate on its existing three-year fixed-term British Savings Bonds from 4.15% AER to 4.35%.
Shorter-term savers are continuing to see the best returns, however, with accounts offering more than 5% interest still up for grabs – though these could start to disappear soon.
Variable-rate accounts are usually the first to see cuts in response to base rate falls, but for now they seem to be holding steady with deals of more than 5% available. Again, it remains to be seen how long this will last.
- Find out more: best savings accounts
Why has inflation risen again?
July's inflation rise is largely down to household energy prices dropping at a slower pace than this time last year.
It has meant energy prices are having less of downward impact on the CPI figure and ultimately increasing the year-on-year rate of inflation.
The ONS also notes that although energy prices are lower in July 2024 than they were a year ago, and are much lower than their peak in the first quarter of 2023, the cost of gas and electricity in July 2024 is still around 68% and 45% higher, respectively, than in March 2021.
Falling prices for restaurants and hotels helped slow the rate of inflation in July 2024. Transport costs also fell, with maintenance and repairs of personal transport equipment, passenger transport by air, and motor fuels all pushing the CPI rate down.
The graph 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. This month's figure means inflation is slightly above that number after hitting the target two months in a row. Before July 2021 it was even lower, hitting a rock-bottom figure of 0.2% in August 2020 due to the impact of the pandemic.
It's important to remember, however, that even when inflation is at the Bank of England's target level, it doesn't mean prices are going down; it just means they're rising at a slower rate than before.
