Right now, less than a quarter of all savings accounts pay enough interest to fight off inflation – if you haven’t done so already, it might be worth considering taking out an offset mortgage to make the most of your savings.

Inflation rates have increased for the first time since February this year and moneysupermarket.com has warned savers to make sure their savings work hard for them by checking their savings products’ rates do not get eaten away by inflation.

Basic rate tax payers will need an interest rate of at least 1.875% to gain benefit in real terms from their savings, increasing to 2.5%  for higher rate tax payers, yet research by moneysupermarket.com shows this is harder to achieve than it would seem.

Easy access accounts have been hit the hardest; only 40 out of over 269, 15%, easy access accounts are paying at least the 1.875% that is required by savers to keep up with inflation.

The news gets worse for high rate taxpayers, with only 7% of easy access accounts able to beat inflation at its current level, and this lowers to a mere 5% of cash ISAs.

Kevin Mountford, head of banking at moneysupermarket.com says: “We expected to see saving rates creep down before the end of the year, but if rates go any lower then savers will find it almost impossible to beat inflation. Anyone taking out a new deal should look for the highest return on terms that suit them, otherwise as the economy stabilises we might see inflation creep up even more and bite away at those interest rates. I would urge savers to be more attentive than ever to ensure they get the best return possible.”

The answer is simple – take out a tax-beating offset loan. Because your savings do not actually accrue interest in an offset, you do not actually pay any tax on the benefits – they appear through a lower mortgage rate instead. Think of it as a legal, efficient tax loophole – so talk to an offset mortgage expert about jumping through that loophole and actually make some money from your hard earned savings for a change.

SOURCE: Moneysupermarket.com, 18/11/09

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