Savers at big name banks are missing out the most, experts find

Loyal savers will be short-changed by more than £300 this year if they stick with the big banks, Which? has warned.

The consumer group audited savings rates paid over the last three years and found customers of big name banks were missing out the most.

Savers have been earning returns as low as 0.1pc despite the Bank of England driving up rates, which has now reached 4.5pc.

It comes as banking bosses have come under fire from MPs for the poor rates on offer to savers.

Which? found that customers with a £10,000 deposit could earn £312 more over a year if they moved their money to the market-leading easy-access account, which pays 3.82pc.

Barclays and Lloyds Bank customers received the lowest returns over the past three years, analysis found. Customers with Barclays’ Everyday Saver and Lloyds’ Easy Saver accounts earned an average of 0.1pc between January 2020 and March 2023.

The Bank Rate was cut from 0.75pc to 0.1pc in 2020, remaining at a record low until December 2021, when it began climbing. Yet the Barclays Everyday Saver account now pays 0.7pc, still well below the Bank Rate.

The Financial Conduct Authority, the regulator, has recently warned that big banks were harming longstanding customers by refusing to raise savings offers, saying its new consumer protection rules from July would require a “significant cultural shift”.

Nikhil Rathi, chief executive of the FCA, said it has “challenged” some of the worst offenders who failed to increase returns fairly or did so with a long delay compared to increases to mortgage rates.

The Treasury Select Committee also wrote to the heads of Britain’s biggest banks to raise its concerns as parts of its investigation into banks’ savings rates.

High street banks paid an average of 0.16pc on easy access savings from January 2020 to March 2023, compared with 0.57pc and 0.42pc offered by challenger banks and building societies respectively.

This gap was wider for easy access savings accounts than for easy access Isas, one-year fixed-rate bonds and Isas, and five-year fixed-rate bonds and Isas.

Lloyds also came in the bottom three for rates offered on easy access Isas, paying an average of 0.13pc.
Nationwide and the Danish bank Danske offered a “measly” average rate of 0.08pc, Which? said.

Challenger banks Saga and Gatehouse Bank paid the highest returns on easy access savings, averaging 1.49pc and 1.25pc, respectively.

Brown Shipley came in third at 1.32pc and topped the rankings on one-year bonds at 2.71pc.

Despite offering competitive rates, challenger banks have struggled to entice savers away from bigger and more established names.

Jenny Ross, editor of Which? Money, said: “With millions of consumers still feeling the impact of an unrelenting cost of living crisis, it’s become even more important to get better returns on savings accounts. Yet, our research shows that established high street banks are shortchanging customers by potentially hundreds of pounds a year.

“If the FCA’s Consumer Duty is worth the paper it’s written on, the regulator will clamp down heavily on firms offering unjustifiable savings rates.”

She recommended savers switch accounts if they are still earning a low rate.

Research from investment firm Hargreaves Lansdown has previously revealed that almost one in ten savers said they have not switched because they believe high street banks are safer, while a third previously said interest rates were too low to bother.

A spokesman for banking trade body UK Finance said: "The rates an individual firm offers on its savings products are driven by a number of different factors, not just the Bank of England's bank rate.

"One important factor is whether someone wants instant access or can deposit their money for a longer period of time.

"While the interest rate on an instant access account may be lower, they offer customers the flexibility to access their money when they need it. The market is competitive with a range of fixed and variable rate products available."

Although banks have been slow to pass on interest rate rises to savers, mortgage borrowers have not been spared from increases to their borrowing costs. The average two-year fixed mortgage rate has jumped from 2.34pc to 5.35pc since interest rates began rising in December 2021.