Explore the Savings Rate Disparity amid bank rate changes. Discover why experts advise seeking better deals for optimal returns. Learn how major banks lag in competitive rates and how savvy savers can navigate this landscape.
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Amidst the availability of up to five percent annual returns from premier easy access accounts, major UK banks are extending notably lower offers to their loyal customers. Financial experts are now advocating for savers to proactively seek better options elsewhere. The Daily Express has been a vocal advocate for increased fairness from leading financial institutions, urging for higher savings rates.
While the Financial Conduct Authority (FCA) vowed to take strong measures against unjustifiably low savings rates for loyal customers, recent exclusive figures obtained by the Express reveal that there is still significant progress to be made. Although easy access account interest rates have risen considerably due to the Bank of England’s base rate hikes since December 2021, the prominent players in the savings account sector remain lesser-known challenger banks and select building societies.
Among the top 50 easy access accounts, the average interest rate now stands at 3.63 percent for £5,000 balances. This marks a substantial increase from the 0.46 percent average in November 2021 when base rates were a mere 0.1 percent. However, major banks offer an average of just 1.52 percent to easy access savers.
This discrepancy is even more pronounced in one-year fixed-rate savings bonds, where significant players are beginning to respond to pressure with more competitive offers. Among the top 50 one-year fixed rates, the average return is 5.44 percent, with major banks offering an average of 4.97 percent.
The research, compiled by banking specialist Andrew Hagger from MoneyComms, underscores that major banks are trailing the easy access market and should enhance their offerings. Approximately £250 billion is believed to be languishing in low-interest savings accounts, many of which were established years ago. Given the current rampant inflation eroding the value of cash, earning zero interest has become even more detrimental.
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Investec’s David Hunt emphasizes that savers cannot rely on their providers for the best deals and should actively explore other options, transferring their funds if necessary. He highlights the substantial differences in rates even among the top 50 providers.
Savings Champion’s Anna Bowes notes that easy access rates have reached their highest level since 2009 as banks anticipate further base rate hikes. Furness Building Society’s Triple Access Saver, offering five percent on balances of £1 and above, is among the market leaders. However, it comes with restrictions, allowing only three withdrawals annually.
While the majority of best buy accounts are accessible online, some, like the Furness deal, require branch or postal management. Beehive Money offers the next best easy access rate at 4.90 percent for balances starting at £1,000, albeit with a bonus of 2.25 percent expiring in August 2024.
As easy access variable rates see daily increases, they can also be swiftly withdrawn. The example of Tandem Bank paying five percent last week but now removed from sale serves as a testament to this volatility.
While easy access rates have experienced significant improvements, the ascent of returns on best buy fixed-rate bonds seems to have peaked. Banks and building societies are bracing for potential base rate cuts by the Bank of England next year. Despite this, there are still options like a five-year fixed-rate at 5.80 percent offered by United Trust Bank and RCI Bank. Recognise Bank offers the highest interest rate, 6.1 percent, on a two-year fixed rate bond.
Savers who secure such rates now might find themselves enjoying returns that outpace inflation. However, as easy access rates rose, they can just as swiftly recede when base rates decrease. This reality underscores the need for savers to remain vigilant and adaptable.
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