Building society raises rates on accounts – does it beat inflation?

Martin Lewis advises on savings accounts and premium bonds

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Earlier this month, Teachers Building Society confirmed it had increased rates on four of its cash ISAs. This included the financial institution’s easy access and notice ISA savings account options. However, in light of the cost of living crisis, savers will be wondering whether this new deal will beat inflation.

For the building society’s accounts for all savers, its Cash ISA (issue six) now pays a 1.65 percent interest rate.

This is the Teachers Building Society’s easy access variable rate cash ISA and has a minimum opening balance of £100.

Furthermore, the organisation’s Cash ISA notice 90 (issue 10) now pays an interest rate of 1.70 percent following the hike.

This savings account has a 90 day notice of withdrawals and also has a minimum opening balance of £100.

For its teachers savings accounts, the building society has hiked interest rates to teachers and education professionals to 1.70 and 1.75 percent.

However, inflation in the UK currently stands at 10.1 percent and is expected to exceed as high as 18 percent under some financial projections.

The growing concern over the skyrocketing inflation rate has worried savers who are seeing diminishing returns from interest rates that only fail to keep up.

David Leek, the commercial director at Teachers Building Society, outlined why the organisation is opting to raise rates despite these inflation concerns.

 Mr Leek explained: “The new rates on our easy access and notice account cash ISAs provide interest rates amongst the best on the market for savers looking for a secure, tax free home for their money.

“With rates rising, more savers could breach the Personal Savings Allowance (PSA) for the first time, making cash ISAs especially attractive to those who have built up savings and could now face paying tax on the interest earned.

“We can help with transferring in savings from other providers to make the process smoother.

“Those who choose Teachers Building Society can also benefit from knowing that by saving with us, they are choosing an organisation whose values are rooted in social purpose – helping more teachers buy their first home.”

READ MORE: Britons in higher bracket can do 2 main things to reduce tax payments

Myron Jobson, a senior personal finance analyst at interactive investor, shared how inflation and the current cost of living crisis is hurting savings accounts.

Mr Jobson said: “Borrowing increased amid the biggest fall in living standards in generations, but while overdraft levels rose gradually in Q2 this year, it remained five percent below pre pandemic levels – suggesting that Covid and the cost-of-living crisis have made many people re-evaluate their spending and savings habits.

“People understood the squeeze on household budgets is only going to get worse this year, with inflation expected to rise further – although not as high as feared once the new energy support measures come into play.

“For many, taking out more debt would add to the already weighty pressure on their budget.”

The finance expert outlined how savings figures in the UK has plateaued following the boost that came during the lockdowns of the COVID-19 pandemic.

He added: “Household savings built up during the pandemic are still going strong – but haven’t grown.

“This suggests that our enthusiasm for saving has been renewed following a reprieve in savings rates from rock bottom levels after increases to the rate of interest.

“There is also a budding appreciation of the importance of building an ample cash buffer amid rising prices.

“The harsh reality is rising prices eats into the amount many people have to save for everything else.”

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