Historical inflation rate vs savings account rates

Do inflation rates reduce the value of your savings?

Inflation represents how goods and services rise in cost, which has a direct influence on the value of your money. While interest rates on savings accounts might make it seem like the value of your account is increasing, inflation could be causing your savings to lose value in “real terms”. We have looked into historical inflation and savings accounts interest rates to see how much is lost due to the rising costs of living.

Quick overview

  • On average, Brits have £7,509 in savings.
  • The average UK savings account has effectively lost £1,012 (13.5%) in value since 2017.
  • Inflation as of July 2022 is 15 times higher than the average saving account rate.
  • The inflation rate is currently 9.1%, which is the highest recorded figure since 1981.
  • The Bank of England has projected that inflation will hit 11% in 2022, making savings accounts 10.41% less valuable within the year.
  • In 2021, interest rates hit a record low of 0.35%, this is 97% less than the highest interest rate in 1989 (11.96%).
  • At the current rates, the average saver in the UK will have effectively lost 8.5% in 2022.

Inflation and savings rates since 1980

This graph shows how savings rates have historically been above inflation. However, since 2017, inflation has remained above the average UK savings account interest rates. In 2021, inflation was 2.17% higher than savings account interest rates. This differs considerably from 1990 when interest on saving accounts was 13.50% while inflation was 8.06%.

Year UK average inflation rate UK average saving accounts rate
1980 17.97% 10.50%
1981 11.88% 8.90%
1982 8.60% 8.54%
1983 4.61% 6.75%
1984 4.96% 7%
1985 6.07% 7.57%
1986 3.43% 8.65%
1987 4.15% 9.83%
1988 4.16% 9.31%
1989 5.76% 11.96%
1990 8.06% 13.56%
1991 7.46% 10.57%
1992 4.59% 8.19%
1993 2.56% 5.66%
1994 2.22% 5.36%
1995 2.70% 5.60%
1996 2.85% 4.54%
1997 2.20% 5.45%
1998 1.82% 6.33%
1999 1.75% 4.71%
2000 1.18% 5.47%
2001 1.53% 4.64%
2002 1.52% 3.68%
2003 1.38% 3.73%
2004 1.39% 4.56%
2005 2.09% 4.92%
2006 2.46% 4.68%
2007 2.39% 5.55%
2008 3.52% 5.09%
2009 1.96% 2.21%
2010 2.49% 2.80%
2011 3.86% 2.75%
2012 2.57% 2.80%
2013 2.29% 1.77%
2014 1.45% 1.48%
2015 0.37% 1.40%
2016 1.01% 1.23%
2017 2.56% 1%
2018 2.29% 1.18%
2019 1.74% 1.39%
2020 0.99% 0.64%
2021 2.52% 0.35%
2022 9.10% 0.56%

Value of savings accounts in the past 5 years

If the average UK saver put £7,509 into a savings account in 2017, the account will have lost over £1,012 by the middle of 2022 in real terms. This is a decrease of 13.5% in value within 5 and a half years due to inflation rates being higher.

Year Value
2017 £7,509
2018 £7,391.86
2019 £7,309.81
2020 £7,284.23
2021 £7,258.73
2022 £7,101.22
July 2022* £6,496.90

Value of savings accounts in the past 10 years

The average UK savings account would effectively be £948 worse off in July 2022 than if £7,509 was saved in 2012. This is a decrease of 12.6% in the past 10 years. The inflation rate of July 2022 has caused a significant portion of this decrease, with the equivalent of £610 being lost since the beginning of 2022.

Year Value of savings account
2012 £7,509
2013 £7,526.27
2014 £7,487.13
2015 £7,489.38
2016 £7,566.52
2017 £7,583.17
2018 £7,464.87
2019 £7,382.01
2020 £7,356.17
2021 £7,330.43
2022 £7,171.36
July 2022* £6,561.07

Inflation rate trend

Inflation in 1980 reached 17.97%, which can be attributed to rising oil prices and increased business costs. This is the highest figure in the past 32 years. Since then, the inflation rate has been fairly consistent in the UK, where, until 2022, inflation had not risen above 4% since 1993.

Inflation currently stands at 9.1%, the highest rate since 1981. It is expected to increase even more this year. The Bank of England has projected that inflation will hit 11% in 2022, which would mean savings accounts will be 10.41% less valuable within the year.

Month Inflation rate Inflation (projected)
1980 17.97%
1981 11.88%
1982 8.60%
1983 4.61%
1984 4.96%
1985 6.07%
1986 3.43%
1987 4.15%
1988 4.16%
1989 5.76%
1990 8.06%
1991 7.46%
1992 4.59%
1993 2.56%
1994 2.22%
1995 2.70%
1996 2.85%
1997 2.20%
1998 1.82%
1999 1.75%
2000 1.18%
2001 1.53%
2002 1.52%
2003 1.38%
2004 1.39%
2005 2.09%
2006 2.46%
2007 2.39%
2008 3.52%
2009 1.96%
2010 2.49%
2011 3.86%
2012 2.57%
2013 2.29%
2014 1.45%
2015 0.37%
2016 1.01%
2017 2.56%
2018 2.29%
2019 1.74%
2020 0.99%
2021 2.52%
2022 9.10%
End of 2022* 11%

Savings account interest rates trend

The interest rates for savings accounts have dropped significantly since before 2009. Between 1980 and 2008, interest rates did not drop below 3%. However, since 2009, they have not reached that figure. In 2021, interest rates were a record low of 0.35%, which is 97% less than the highest interest rate in 1990 (13.56%). There are currently no savings accounts in the United Kingdom that offer a higher rate than inflation.

Year UK average savings account rate
1980 10.50%
1981 8.90%
1982 8.54%
1983 6.75%
1984 7%
1985 7.57%
1986 8.65%
1987 9.83%
1988 9.31%
1989 11.96%
1990 13.56%
1991 10.57%
1992 8.19%
1993 5.66%
1994 5.36%
1995 5.60%
1996 4.54%
1997 5.45%
1998 6.33%
1999 4.71%
2000 5.47%
2001 4.64%
2002 3.68%
2003 3.73%
2004 4.56%
2005 4.92%
2006 4.68%
2007 5.55%
2008 5.09%
2009 2.21%
2010 2.80%
2011 2.75%
2012 2.80%
2013 1.77%
2014 1.48%
2015 1.40%
2016 1.23%
2017 1%
2018 1.18%
2019 1.39%
2020 0.64%
2021 0.35%
2022 0.59%

How much is your money worth each year?

Between 1983 and 2010 savings accounts made money in real terms as savings interest rates were higher than inflation. However since 2017, savings accounts hve lost money every year in real terms.

Year How much would be earned/lost from £1,000 being put into a savings account
1980 -£74.70
1981 -£29.80
1982 -£0.60
1983 £21.40
1984 £20.40
1985 £15.00
1986 £52.20
1987 £56.80
1988 £51.50
1989 £62.00
1990 £55.00
1991 £31.10
1992 £36.00
1993 £31.00
1994 £31.40
1995 £29.00
1996 £16.90
1997 £32.50
1998 £45.10
1999 £29.60
2000 £42.90
2001 £31.10
2002 £21.60
2003 £23.50
2004 £31.70
2005 £28.30
2006 £22.20
2007 £31.60
2008 £15.70
2009 £2.50
2010 £3.10
2011 -£11.10
2012 £2.30
2013 -£5.20
2014 £0.30
2015 £10.30
2016 £2.20
2017 -£15.60
2018 -£11.10
2019 -£3.50
2020 -£3.50
2021 -£21.70
2022 -£84.10

However, inflation in July 2022 stands at 9.1%. This is considerably higher than the average savings accounts interest rate for 2022, which is 0.59%. This means that the value of savings is down 8.41% this year. In real terms, if you had saved £1,000, it would be worth £85.10 less compared to the start of 2022 (£914.90).

Sources used

  • Finder commissioned Censuswide in July 2022 to carry out a nationally representative survey of adults aged 18+. A total of 2,000 people were questioned throughout Great Britain, with representative quotas for gender, age and region. Some of these figures were then combined with the average cost of living data from the ONS.

Methodology

    • Finder analysed historical inflation rates using worlddate.info and historical saving rates on Swanlowpark.co.uk.

For all media enquiries, please contact

Matt Mckenna
UK Communications Manager
T: +44 20 8191 8806
matt.mckenna@finder.com@MichHutchison/in/matthewmckenna2

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