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Savings rates beat property price growth

Investing your money in a top savings account over the last year will have earned you more money in returns than the property market, new research has found.

Mutual insurer, Royal London, has discovered the best-buy interest rates were now higher than the annual average property price growth in England.

It came to the conclusion after analysing Land Registry figures, which showed the average home in England grew in value by 2.6% in the past 12 months to £247,430. Meanwhile, the best fixed-rate savings bond, as highlighted by analysts at Moneyfacts, was a seven year deal paying out 2.75% interest.

It means the best savings rate has performed better than the average UK property. Even the best easy access savings account, which currently pays 1.42%, would be enough to beat house price rises in the slowest regions of London and the South East, some areas of which have seen price declines.

Becky O’Connor, personal finance specialist at Royal London, said: “Savings rates have been offputtingly low over recent years, as a result of the rock bottom Bank of England base rate. However they have risen slightly as the base rate has increased.

“Coupled with a decline in the rate of house price growth, this trend has resulted in the most competitive savings accounts now paying more interest annually than property owners typically earned in the last 12 months.

“While it is still difficult to beat inflation with most savings rates on offer, if you live in London or the South East, it is now easy enough to beat the current rate of house price inflation with a savings account.”

Royal London pointed out its research was based on savings accounts with the very best rate on the market. It said the rate and term of a savings account could make a difference to returns you end up with.

Indeed, the returns on individual properties could also depend on a number of factors, including its location and whether it’s a main home or a buy-to-let.

Tax advantages

Royal London is urging savers and investors to remember the tax advantages of pensions and ISAs when planning where to place their cash for the long-term.

O’Connor added: “It’s important to remember that property or savings accounts are not the only things you can do with your money for long term financial returns. Saving into a pension comes with significant tax advantages and over the long term, the performance of stocks and shares investments tend to outperform cash.

“Money that goes into a pension benefits from tax breaks whilst money withdrawn from an ISA is tax free.”

Source: The Money Pages