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Big banks under attack over miserly savings rates

Big banks under attack over miserly savings rates
Emma Lunn
Written By:
Emma Lunn

High street banks have been accused of short-changing savers by offering paltry interest rates on easy access savings accounts.

Research by Which? found that challenger banks and building societies routinely offer much better savings rates than big banking brands.

The research comes a few months after members of the Treasury Select Committee took banks to task over their low savings rates.

Between October 2022 and October 2023, the Bank of England hiked the base rate seven times, raising it by 3 percentage points from 2.25% to 5.25%.

However, Which? analysis shows that over the same period, the average easy-access rate offered by the big banks only grew by 1.56 percentage points, rising from 0.42% to 1.98%.

By comparison, building societies raised their easy-access rates by nearly two percentage points, on average (from 0.96% to 2.93%), while challenger banks made an increase of 2.31 percentage points (1% to 3.31%).

Which? found that most high street banks have failed to make substantial improvements to easy access rates since the FCA set out a 14-point action plan for cash savings in July.

Between July and October the average rate across the market for easy access accounts went from 2.41% to 3.16% (+0.75 percentage points), but of the big names only Barclays (+0.8 percentage points) and Ulster Bank (+4.1 percentage points) improved their rates by more than this amount over the same period.

At the time of writing, Ulster Bank is also the only high street name to offer an above-average easy access rate: its Loyalty Saver offers 5.2% on balances of £5,000 and over. Meanwhile, Lloyds (1.4%), Halifax (1.5%), Barclays (1.65%) and HSBC (1.98%) all pay less than 2% on their easy access accounts.

Which? found that high street banks have shown more improvement across their one-year fixed rate deals, compared to competitors. The average rate offered by the major banks on these types of accounts over the past 12 months has increased by 3.45 percentage points, compared to challenger banks (2.61 percentage points) and building societies (2.72 percentage points).

However, the rates themselves remain unimpressive. Barclays is the only big bank paying an above-average rate, and none (including Barclays) make it into the top half of deals on offer.

Big banks must improve rates

The FCA’s new Consumer Duty means firms must regularly review their products to demonstrate that they offer fair value – and those that fall short of this requirement should expect to face tough, prompt action from the regulator.

Jenny Ross, editor of Which? Money, said: “Our research shows that despite Which?, MPs and the regulator repeatedly raising the alarm over meagre savings rates, big banks still aren’t getting the memo.

“It’s crucial that anyone fortunate enough to be able to put money aside during a cost-of-living crisis is getting the best returns possible. Once again, it’s challenger firms and building societies that lead the way.

“Firms must act urgently to improve their rates or face tough action from the regulator by the end of the year.”