UK savers are missing out on hundreds of pounds in interest as banks pay “measly rates” on their cash even as interest rates are at a decade high.
Consumers face rates as low as 0.1% for some instant access savings accounts, consumer group Which? found. This compares to the Bank of England’s key interest rate of 4.5%, the highest it has been since 2008.
For instant access accounts, Barclays (BARC.L) finished joint-bottom of the pile. Its ‘Everyday Saver’ account paid an average of just 0.1% between January 2020 and March 2023.
Lloyds Bank's (LLOY.L) ‘Easy Saver’ and Hodge Bank's ‘No Notice’ account also paid an average of just 0.1%.
Lloyds also came in the bottom three for rates offered on instant-access ISAs. Its ‘Cash Isa Saver’ paid an average of 0.13% between January 2020 and March 2023. The Danish bank Danske (DANSKE.CO) and Nationwide (NBS.L) came below Lloyds, both offering a “measly” average rate of 0.08%.
Read more: UK house prices rise as agreed sales jump
Some savers may be better off with challenger banks — smaller, more modern financial institutions taking on the long-established status-quo — or building societies, particularly when it comes to instant access deals, Which? research suggested.
Challenger banks paid an average rate of 0.57% over the three-year period, while building societies paid 0.42%. High street banks, on the other hand, averaged a paltry 0.16%.
“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,” said Jenny Ross, editor of Which? money.
“Yet, our research shows that established high street banks are short-changing customers by potentially hundreds of pounds a year.”
Some of the best performing providers in Which’s analysis may be names many consumers have not heard of before. Private bank Brown Shipley came top for one-year fixed savings accounts, averaging 2.71%. Its account is offered through savings platform Raisin. Brown Shipley came third for instant-access savings, averaging 1.32%.
Saga and Gatehouse Bank topped the pile when it came to instant-access ISAs, offering average rates of 1.49% and 1.25%, respectively.
According to Hargreaves Lansdown, a third (32%) of people thought that interest rates were too low to bother switching banks, while almost one in 10 (7%) mistakenly thought that high street banks are safer.
However, Which?’s analysis shows that, looking at rates today, savers could earn £312 more over a year (£382 vs £70) on a £10,000 deposit by putting their money in the market-leading instant-access account, offered by Chip, compared to Barclays’ Everyday Saver. Based on a £1,000 deposit, you’d earn £31.20 more (£38.20 vs £7).
The Treasury committee has recently raised concerns about savings rates and has been writing to providers.