Savers still suffering from high inflation rates

With The Bank of England announcing that both CPI and RPI rose sharply in March, savers are being squeezed further as interest rates remain low.

Currently no easy access savings accounts pay enough interest to offset the effects of inflation and taxation, with only some fixed rate bonds paying high enough rates. As a result many savers may want to consider more efficient ways to make their money work for them. Britain's number one comparison site, moneysupermarket.com looks at the best options for savers in this low rate environment.

Basic rate tax payers will now need an account paying at least 4.26 per cent to gain benefit in real terms from their savings, increasing to 5.67 per cent for higher rate tax payers and 6.81 per cent for 50 per cent taxpayers.

Over Paying Your Mortgage

Making an overpayment of just £50 each month would knock 3.5 years off a mortgage term and save £11,329.17 in interest. Alternatively if a mortgage customer were to overpay their mortgage by £100 each month, they could save £19,397.66 in interest and would cut the mortgage term by 6.2 years.

Over Paying Your Credit Card

Making the minimum repayment on a credit card balance of £2,500 can take cardholders up to 25 years to pay off, with an additional interest charge of £3,277.49. However by making an overpayment of just £10 a month, they can reduce the time taken to pay off the balance by 13 years and 5 months, with an additional saving of £2,019.42 in interest.

Offsetting Your Mortgage

Consumers preferring to save each month should consider offsetting their mortgage. By choosing to offset a savings amount of £30,000, they could reduce the term of their mortgage by 4 years and 7 months and save £8,595.27 in mortgage interest.

Kevin Mountford, head of banking at moneysupermarket.com, said: "Over the last few months we have seen inflation rise and fall and it is becoming increasingly difficult for savers to keep an eye on the best way to offset the effects of inflation on savings. Given petrol prices increased to record levels in April, I wouldn't be surprised if inflation increases further when the next announcement is made next month. This is not great news for savers and now may be the time for consumers to look at alternative ways to make the most of their savings pot. One option of overpaying expensive debts by just a little each month can soon make a big difference to overall sums and now is the time to do it."