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Savers should move their savings from the big banks to the challengers to get the most for their money, experts have urged.
Savers have been eagerly waiting for deals to improve, following last week’s announcement from the Bank of England that interest rates would increase from 0.5pc to 0.75pc, but the majority of established high-street names have yet to confirm increased rates on savings accounts.
Most of the high-street banks quickly increased mortgage rates last week, raising the question of when things will improve for savers. But even if the big banks did pass on the interest rate increase, savers would still be getting a bad deal, experts have said.
This is because the rates on easy access accounts on offer from the high-street banks are so low that, even if the banks were to pass on the full 0.75pc rate rise, the most competitive account would still fall far below the rates offered by the challenger banks.
Some of the well-established banks offer easy access account rates from as little as 0.2pc, with one – NatWest’s instant saver account – paying out a mere 0.1pc.
The best rate found among the bigger names is HSBC’s online bonus saver, which has an interest rate of 0.45pc.
Such rates appear in stark contrast to the deals offered by challenger banks, which range from 1.3pc to 1.4pc.
Currently, the best rate on an easy access savings account is available with Coventry Building Society, paying 1.4pc.
Rachel Springall of the comparison site MoneyFacts said savers would not be rewarded by high-street banks for their loyalty and should look elsewhere, adding that the bank’s reluctance to boost savings rates is nothing new.
“In November 2017, it took around a month before most savings providers passed on the rise, and at the same time, some brands were selective with which accounts they improved,” she said. “With this in mind, savers will clearly earn much more interest by switching to one of the challengers than leaving their cash languishing in a poor easy access account. Convenience and loyalty will cost you."
Tom Adams, head of research at comparison site Savings Champion, said the high-street banks had little interest in offering savers competitive rates thanks to Government-led initiatives, such as the Funding for Lending and Term Funding schemes, which have left them with high levels of reserve cash. He is urging savers to cut their ties.
“The good news is that there is still competition in the savings market, which is pushing rates in the right direction for savers. This competition is mainly between the newer challenger banks, who are keen to encourage savers in by offering better rates on their savings accounts,” he said.
Those who want to make the most of their money, who are able to tie it up for five or even 10 years, could consider investing in a stocks and shares Isa or opting for a fixed-term account.
However, if you need instant access to your savings from time to time, you will need to shop around for the best deal.
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“The best way forward for all savers is not necessarily to wait for their provider to put rates up – in some cases this could be a long wait – but to take action and move to a best buy account.
"If your bank or building society is paying you a poor interest rate, don’t stand for it – vote with your feet and find an alternative,” Mr Adams said.
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