Savers with high street banks could be missing out on hundreds of pounds of interest each year as a result, data shows.
It comes after high street banks made large profits. Lloyds reported £9.64bn in profits in 2023, with Barclays making £6.43bn and NatWest £5.49. Santander UK, HSBC also made billions.
Many banks cut their savings rates in response to the Bank of England reducing interest rates twice last year. However, while the Bank’s base rate still remains at 4.75 per cent, many easy-access deals, the most popular type of account, are far below this.
Savings rates are likely to come down even more, as the base rate is expected to fall this year, by at least 0.5 percentage points.
“The banks rely on the apathy of savers who stay put rather than switch to better deals – even when they could in some cases earn twice as much interest.”
She added: “Savers who prefer to have their cash at hand will unsurprisingly feel disgruntled that the situation has only worsened, as the Bank of England made base rate cuts, the big banks were soon to follow.
Banks have been targeted previously by Commons Treasury Committee for not passing on higher interest rates to savers, with MPs calling on institutions to be more generous towards their customers rather than increasing their profit margins.
Harriett Baldwin, a Conservative MP who previously chaired the Treasury Committee, said: “Banks who remain uncompetitive for savers are being left behind, as evidenced by results which show a huge number of people switching lenders for a better deal. Banks will be aware of the regulators’ roll out of consumer duty and I hope this leads to better outcomes for consumers.”
The Treasury has been contacted for comment.
datawrapper.dwcdn.net/Eyqmf/1/Best savings rates
Chip’s easy access account pays a rate of 4.85 per cent, including a 1.03 per cent six-month bonus, but limits you to just three penalty-free withdrawals a year.
Savers can also get similar rates by opting for a fixed deal. For example, the best one year fixed rate is with Vida Savings offering 4.77 per cent.
Should interest rates go down, as expected, fixed rates can be a good option if people can afford to lock their money away as they will offer a better return for longer.
“Savers had got use to low interest rates after the financial crisis of 2007 with this only really starting to improve in 2022.
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Read More“As the base rate rose through 2022, this changed significantly with best buy rates improving rapidly.
It comes at a time when many households, including pensioners, are struggling financially.
The high cost of living, sticky inflation and the loss of the winter fuel payment for those not in receipt of pension credit – affecting around 780,000 eligible pensioners, according to official figures –all contribute to how much disposable income people feel they have.
Ms Springall said: “Loyalty does not pay which is why savers need to look beyond the biggest brands when comparing savings rates.
Anna Bowes, co-founder of Savings Champion, added: “The bottom line is that the rates on the high street banks standard easy access accounts are generally very uncompetitive, so don’t leave your cash to languish, earning less than inflation, when you could be earning so much more.
What did the banks say?
The i Paper asked the five largest banks why they were not passing on high interest rates to their easy access accounts.
A HSBC UK spokesperson said: “While we do review our rates in line with market conditions, we are committed to supporting customers by providing overall value on our savings accounts and offer a range of different types of account to suit our customers’ varied needs.
A NatWest spokesperson said: “We regularly review our interest rates. Our easy access accounts are our most flexible and offer customers immediate access to their funds with no conditions.
Barclays and Nationwide have been contacted for comment.
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