Millions of UK households have seen the real value of their savings reduced over the past five years, despite earning interest on their deposits. New analysis suggests inflation has eroded purchasing power by around £1,400 on a £10,000 savings balance.
The findings arrive as mortgage costs remain elevated and concerns persist that future inflation could once again weaken returns for savers. Financial analysts say current conditions reward active management of savings rather than relying on long-held accounts.
According to analysis from Moneyfactscompare.co.uk, persistent inflation over five years has reduced the effective value of savings even where account balances increased in nominal terms. The assessment compares interest earned against the cumulative impact of rising consumer prices. At the same time, mortgage borrowers continue to face pressure as rates remain well above the ultra-low levels seen in previous years, creating challenges across household budgets.
Savings Growth Has Failed to Keep Pace With Inflation for Many Households
Moneyfactscompare.co.uk said savers who fixed their money into a five-year account in May 2021 at a top available rate of 1.40% may have experienced significant real-term losses.
According to the analysis, a £10,000 deposit placed at that time would now stand at approximately £10,700. Yet average inflation of around 4.6% per year over the same period reduced what that money could buy. In current terms, the real value of that balance falls to around £8,600, representing a loss in purchasing power of roughly £1,400 over five years.
The report noted that current conditions are more favorable for savers than during the low-rate environment. Consumer Price Index inflation fell to 2.8% in April from 3.3% in March, while the Moneyfacts Average Savings Rate stands at 3.55%.
Moneyfactscompare.co.uk reported that 1,806 savings products currently exceed inflation. These include 202 easy access accounts, 178 notice accounts, 180 variable-rate ISAs, 410 fixed-rate ISAs, and 836 fixed-rate bonds. By comparison, there were 1,326 inflation-beating products in May 2025 and 1,558 in May 2024.
Mortgage Borrowers Face Higher Repayment Pressure as Rates Remain Elevated
According to Moneyfactscompare.co.uk, average mortgage rates moved from 5.71% to 5.64% since the previous inflation figures were published. Average two-year fixed rates declined from 5.83% to 5.73%, while average five-year fixed rates edged down from 5.73% to 5.66%.
Despite those movements, borrowers leaving ultra-low fixed-rate deals continue to face sharply higher costs. The analysis stated that households remortgaging from a low five-year fixed product could see annual repayments increase by more than £5,400 on a typical £250,000 mortgage over 25 years.
Caitlyn Eastell, personal finance analyst at Moneyfactscompare.co.uk, said mortgage markets remain sensitive to external shocks, including movements in swap rates linked to geopolitical tensions and uncertainty in the UK political environment. Eastell also said that while higher savings rates offer improved returns compared with previous years, households should focus on overall value and review savings products regularly rather than relying on long-standing accounts that pay below-average rates.
