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Inflation leaps to 3.5% in April – how many savings accounts can beat it?
'Awful April' price hikes on household bills are behind the rise
Sharp increases to household bills during what's been dubbed 'Awful April' helped push inflation to 3.5% – its highest level in more than a year.
The number of savings accounts that can beat the Consumer Price Index (CPI) figure have plummeted as a result, meaning more nest eggs are losing value over time.
Read on to find out which accounts offer the best returns on your money, and for more on the reasons behind the latest Office for National Statistics (ONS) inflation data.
The best inflation-beating savings accounts
Our analysis of Moneyfacts data shows the proportion of savings accounts that beat inflation is falling.
There are currently 1,525 savings accounts (70% of all products) that offer rates higher than 3.5%. This includes instant access and variable-rate deals, fixed-rate bonds and Isas. This figure is down significantly from last month, when 86% of accounts beat inflation.
This table shows the top rates currently available on instant access and fixed-rate cash Isas and savings accounts, ordered by term.
| Instant access | Cahoot | 5% (a) | 61% | £1 | Internet | Monthly, yearly |
| One-year fixed rate | Tandem Bank | 4.44% | n/a | £1 | Internet, mobile app | Yearly |
| Two-year fixed rate | Secure Trust Bank | 4.42% | n/a | £1,000 | Internet | Yearly |
| Three-year fixed rate | Birmingham Bank | 4.43% | n/a | £5,000 | Internet | Yearly |
| Four-year fixed rate | JN Bank | 4.4% | n/a | £100 | Internet | Yearly |
| Five-year fixed rate | Birmingham Bank | 4.43% | n/a | £5,000 | Internet | Yearly |
Table notes: rates sourced from Moneyfacts on 21 May 2025. 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 (a) Offers 5% AER up to £3,000
- Find out more: best savings accounts 2025
How savings rates track against inflation
It's important to choose an account with a rate above 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:
The average rates on one-year and longer-term bonds have beaten inflation since October 2023. But this month's jump in the CPI figure means the average instant-access rate of 2.76% AER is significantly lower than the pace at which prices are rising.
The last time it dipped below inflation was in January 2025, but the gap was much smaller.
What's happening to savings rates?
Savings rates have been high thanks to the BoE raising the base rate 14 times between December 2021 and August 2023.
But when the base rate was reduced last August, average savings rates began to drop too. The BoE has cut the base rate three times since then, falling to a two-year low of 4.25% on 8 May.
Savers looking to lock their money away in a fixed-term bond will be disappointed to hear that average rates are continuing to drop, with interest offered on accounts of all lengths falling between 1 April and 1 May.
One silver lining is that average instant-access rates saw a slight uptick during the same period, from 2.76% AER to 2.78%. However, we are likely to see these figures drop as providers make reductions in response to the latest base rate cut.
It's important to remember that the base rate isn't the only influence on savings rates. Demand for a product or competition from other providers can also push rates up and down.
Why is inflation rising?
Last month's steep increases to household bills, including energy and water, were the biggest driver behind April's sharp inflation rise.
ONS figures show that the combined cost of electricity, gas and other fuels rose by 6.7% in the year to April 2025. The energy price cap, which increased 6.5% to £1,849 from 1 April 2025, is a key reason for fuel costs rising.
The price of water and sewerage also soared month on month, rising by 26.1% between March and April 2025. The ONS claims it is the largest increase since at least February 1988.
Higher food prices, a rise in vehicle duty and an increase in air fares also pushed up inflation.
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.
- Find out more: how to deal with this year's price hikes
