For years, savers have quietly lost wealth in real terms — and many haven’t even realised it. While the habit of “saving for a rainy day” remains deeply ingrained in British culture, the returns from traditional savings accounts have, in many cases, failed to keep pace with inflation. The result? A gradual erosion of purchasing power that leaves today’s saver worse off than they were a decade ago.
According to Moneyfacts, the average savings rate between 2008 and 2022 was just 1.52%, significantly below the average inflation rate of 2.7% during the same period. That’s a 14-year stretch where savers consistently lost out — effectively paying for the privilege of parking their cash in a savings account.
To put this in perspective, between 1995 and 2007, the average savings rate stood at 3.78%, a healthy 2.06% above inflation. Back then, putting money into a savings account made sense. It was a genuine wealth-building strategy. Fast forward to today, and that logic no longer holds.
Even now, with headline savings rates grabbing attention — some offering 4% to 7% — the average margin over inflation remains razor-thin. Since July 2023, the spread between average savings rates and CPI has been just 0.49%, barely enough to break even after inflation. And with millions more set to pay tax on their savings interest by 2028, the picture gets even bleaker.
So what’s the alternative?
More and more investors are looking to property. And not just because it’s tangible or traditionally seen as “safe.” Right now, property offers real, inflation-beating yields — especially when investments are geared.
We’re in a rare moment of opportunity. Mortgage rates, which soared in the aftermath of the Liz Truss mini-budget in 2022, have now dropped significantly. This shift has reopened the door for investors to borrow at competitive rates, unlocking strong returns on capital employed. Simply put, you can now buy a property with partial borrowing, earn rental yields that comfortably exceed the cost of debt, and benefit from long-term capital growth — something you simply can’t replicate with a savings account.
Let’s do the maths. Imagine you invest £100,000 into a buy-to-let property using a 75% loan-to-value mortgage. With rental yields of 7% and mortgage rates of 3.7% available on a five year fix, your return on the £25,000 of your own capital could be well into double digits. Factor in capital appreciation and tax efficiencies, and the gap between property and savings widens dramatically. Many of our clients find they can comfortably earn upwards of 15% annualised returns.
Time to Act?
Savers are not just missing out — they’re going backwards. Property, especially when strategically leveraged, offers a compelling alternative. It’s not just about yield. It’s about building long-term wealth, protecting against inflation, and putting your capital to work in a way that savings accounts — even the top-paying ones — simply can’t match.
Now is the time to re-evaluate your financial strategy. If you’re sitting on cash, ask yourself: is it really working for me? Or is it time to think like an investor?
