Savings account holders 'will struggle as inflation rises'

Increasing inflation will cause trouble for people with savings accounts, an expert has said.

People with savings accounts such as fixed rate bonds and cash ISAs are set to lose out as the UK's level of inflation increases, an expert has said.

According to Jason Riddle, co-founder of Save Our Savers, consumers who look to store cash away for their future will bear the brunt of the fact that the country is likely to witness an inflation rise over the next 12 months as it emerges from the global economic downturn.

He was speaking following the publication of data by the Office for National Statistics last week (December 14th 2010), which showed that this measure of monetary health increased slightly to 3.3 per cent in November in comparison to 3.2 per cent one month previously.

Mr Riddle noted that this trend means that "a return of at least 7.8 per cent" on a savings account is now required for "higher rate taxpayers" to get an attractive deal on such a product.

Meanwhile, a specialist has spoken about the possible effect of an interest rate hike.

Anyone with a home credit package such as a tracker mortgage should be wary of a potential rise in the UK's interest rates in the near future, an expert has suggested.

Paul Holmes, chief executive officer of Firstrung, has said that mortgage holders could potentially run into financial difficulties if the Bank of England opted to up the country's base rate by around two per cent as the nation continues to recover following the global economic downturn.

The specialist feels that such a move would lead to a spike in the number of repossessions of properties throughout the country, but added that such a significant rise on interest rates is unlikely to occur in the near future.

He stated this was because of the domino effect such a measure would have, which could result in there being more bailouts necessary.

This comes after the Confederation of British Industry forecast that interest rates could rise gently through to mid-2012.