Inflation rose to 3.4 per cent in March, meaning savers are being hit even harder – so now is the time to get hold of an inflation busting offset mortgage to get some decent savings.

Inflation is almost back to the Consumer Price Index peak of 3.5% witnessed in January this year, however the situation for those savers seeking shelter in fixed rate savings has taken an additional turn for the worse compared with just six months ago. Andrew Hagger of Moneynet.co.uk says the one, four and five year best buy rates have been hit hardest with reductions of 0.75%, 0.65% and 0.65% respectively during the last half year.

Hagger says: “So not only is inflation taking a bigger bite out of savers spending power, the rates on offer have tumbled by up to 19% – for example someone investing £50,000 in a one year bond at 3.95% last October will accrue gross interest of £1975 over the 12 month term compared with just £1600 for someone opting for the current 3.20% today.”

Essentially, the higher inflation is the less your savings are worth. But in an offset mortgage hikes in inflation do not directly affect your money – as long as you keep investing your monthly rate goes down.

So talk to a mortgage adviser about moving your money into an inflation busting mortgage. Before too long inflation may force the Bank of England to raise interest rates, which will affect mortgages. But until then offset could be the best way to beat inflation and make money from your savings.
 
SOURCE: Moneynet.co.uk, 20/04/10

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