How To Protect Your Money From Rising Inflation
Esther Shaw Wed, October 21, 2026 a
Inflation is picking up pace once again.
Not only does this spell bad news for the cost of living, but rising prices can also have a detrimental effect on almost all areas of your finances: from your mortgage and savings to your pension.
In September, the Consumer Prices Index (CPI) measure of inflation rose to 3.5pc, up from 3.1pc the month before, according to the latest data from the Office for National Statistics (ONS). The main factor causing the rise was cost increases to motor fuels.
With inflation expected to continue rising into 2027, here are the steps you can take to protect your money from being ravaged by rising costs.
Minimize the impact on your mortgage
Mortgage rates often rise and fall in sync with the Bank Rate, set by the Bank of England. However, recent weeks have shown that lenders can usher in dramatic rate changes even when the Bank Rate stays still.
"Markets expect the Bank of England to raise interest rates several times over the next 18 months, from 3.75pc today to around 4.75pc by the middle of next year. That is why fixed mortgage rates have gone up even though the Bank of England has not changed interest rates," said Nick Mendes, of mortgage broker John Charcol.
Inflation, caused by rising energy and fuel costs, is the culprit behind these expectations, Mr Mendes added: "The main reason behind those expectations is energy, with higher oil, gas and fuel prices pushing inflation back above 3pc and the Bank expecting it to rise above 4pc early next year."
For those remortgaging, the key is to secure a new deal as soon as you can.
Sarah Tucker, of the HomeOwners Alliance, said: "If you're on a deal ending any time in the next six months, now is the time to start looking and reserve a rate. This gives you a fallback if prices continue rising, without necessarily preventing you from securing something cheaper if the market improves before completion."
Note that tracker and standard variable-rate mortgages are the most exposed to the Bank of England's next move, but a fix will remain the same once you're locked in.
If your deal isn't due to finish for a while yet, and you're concerned about deals being even more expensive in future, Mr Mendes suggested making overpayments.
"By doing this, you reduce the balance you'll be paying interest on when you move to your next mortgage deal," he said. This could be particularly beneficial if overpayments mean you can move to a lower loan-to-value deal, which tends to be cheaper.
Most lenders allow up to 10pc of the outstanding balance to be overpaid each year without triggering an early repayment charge.
He added: "The mistake is doing nothing and hoping the picture improves. Starting to look at options now before your deal ends costs nothing and means a plan is in place – rather than having to do things in a rush."
Protect your savings
As a saver, higher inflation can be something of a mixed blessing.
Sarah Coles, the head of personal finance at AJ Bell, said: "For those prepared to put the legwork in, there are some great rates around right now. However, for anyone less hands-on, it raises the risk their spending power is being devoured by inflation."
Among those most exposed are savers with cash in poor-paying easy-access accounts.
Ms Coles said: "For someone with £20,000, the big six – HSBC, Barclays, Lloyds, NatWest, Santander and Nationwide – pay an average of just 1.16pc on branch-based accounts with no withdrawal restrictions. This is all clearly losing value after inflation."
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, warned that rising inflation should be a "wake-up call for savers". If you're not earning a rate that's equal to inflation, or more, then your money will be losing value in real terms.
So, what can you do?
"We have seen some healthy competition on easy access accounts, with many of the top deals now paying more than 4pc," said Ms Springall.
"This is a great time to compare rates across the market and check that your accounts are still competitive. It's one of the best ways savers can protect the value of their cash."
If your money is not working as hard as it could be, be prepared to make a switch.
For those willing to lock their money away for a period, there are some attractive fixed-rate deals to be found.
Ms Coles said: "Rates have nudged up over time, and you can now get more than 5pc on anything fixed for more than a year – and up to 5.25pc over five years."
If you don't want to commit all of your money to one account, you could set up your own savings ladder, which allows you to split your cash and get payouts every year.
Just remember that while earning more interest is positive, it can come with the risk of being taxed on your savings income.
Jason Hollands, of investment platform BestInvest, said: "Be sure to make full use of available tax allowances, including the personal savings allowance, as well as your precious Isas."
Married couples and civil partners, he added, can also look into making use of interspousal transfers to distribute savings to maximise both sets of allowances. In addition, if one spouse is in a lower tax band than the other, it can make sense for them to hold more cash savings in their name, as they'll have a larger personal savings allowance.
"Those with large cash holdings may also wish to explore Premium Bonds," he said. "These are entered into a monthly prize draw, and while there is no guarantee of winning prizes, if you do, they are tax-free."
What about your investments?
As is usually the case, it's important not to make any knee-jerk reactions. "Making investment decisions based on short-term economic news often does more harm than good," said Megan Rimmer, chartered financial planner at Quilter Cheviot. "For most people, the best approach is to stay focused on long-term goals."
She added that as inflation can gradually erode the purchasing power of cash, maintaining exposure to assets capable of delivering long-term growth remains important.
"Rather than attempting to time markets, or react to every development, investors may be better served by reviewing whether their portfolio still reflects their objectives, time horizon and appetite for risk," she said.
"If circumstances have changed, adjustments can then be made thoughtfully and as part of a broader financial plan, rather than as a reaction."
Be aware that different types of investment can react differently to rising inflation.
Dan Coatsworth, the head of markets at AJ Bell, said: "The central bank playbook when inflation shoots higher is to raise interest rates. Bond yields typically go up when rate expectations increase, and bond prices fall at the same time.
"As a result, we have seen the bond market react most significantly, and gilt yields soar. The stock market appears, at least for now, to be less concerned."
One way to even out any inflationary risks is to focus on diversification.
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