Santander increases rates on accounts as inflation rises

Earlier this week, the bank confirmed it was raising the in-credit interest rate on its 1I2I3, Select and Private Current Accounts. This comes amid the UK’s ongoing cost of living crisis which is being partially caused by a skyrocketing inflation rate. Due to this, savers are seeing less returns on their savings which is cause for concern among banks like Santander.To mitigate the impact of inflation, the Bank of England’s Monetary Policy Committee (MPC) has made the decision to raise the nation’s base rate to three percent.Following this, banks and building societies have passed on this rate hike to their customers with Santander being one of them.This is the fifth time in 2022 that this range of savings accounts have seen their rates increased.The most recent decision from Santander has seen rates rise from 1.50 percent AER/1.49 percent gross (variable) to 1.75 percent AER/ 1.74 percent AER/gross (variable) on balances up to £20,000.READ MORE: Britons urged to consider ‘simple’ boiler hack that could cut energy bills by £112 a year Santander increases interest rates on savings accounts – does it beat inflation? (Image: GETTY)According to the bank, the interest rate has been automatically applied on accounts from November 8, 2022.As a result of this move, Santander Customers can now earn up to £347.22 in interest per year.Furthermore, any cashback savers earn on selected household bills will be paid by direct debit.On top of this, those who do business with Santander can still access preferential rates on the bank’s other products.DON’T MISSPIP claim: The top 5 medical conditions giving £627 a month from DWP – check eligibility [INSIGHT]’I now get money every month!’ Woman, 65, shares way she found extra money for retirement [INSIGHT]NS&I is increasing interest rates on savings accounts up to 3.7% – millions set to benefit [UPDATE]Despite this most recent interest rate rise, inflation in the UK has returned to a staggering 40-year high.The Consumer Price Index (CPI) rate of inflation for September 2022 rose to 10.1 percent after dipping slightly the month before.Even with its decision to raise interest rates, Santander’s savings accounts are unable to directly compete with inflation at this moment in time.Financial analysts believe the country’s inflation rate will continue to remain high for the next year as the UK addresses the economic fallout of the pandemic and Brexit.READ MORE: Attendance Allowance: 6 myths that stop millions of pensioners claiming up to £370 a month  What has happened to interest rates? (Image: EXPRESS.CO.UK) What is an ISA? (Image: EXPRESS.CO.UK)’This is unlikely to change any time soon, because the savings ratio is expected to rise from here, as savers see the looming recession and try to build up whatever savings buffer they can afford.’She added: ‘The big high street banks are going to attract more cash without trying. It means it’s up to the smaller, newer and online banks to bump rates up.’They don’t want a vast amount of new cash, and they don’t want to pay more than they have to for it, so they’re likely to continue nudging rates up a fraction at a time.’If you were waiting for a better rate in order to fix, you’re not going to get it overnight, so you need to be clear about how long you’re prepared to wait, and what rate you’re willing to fix at, or you risk waiting so long you miss out on the best of the rates.’