Save, make, understand money


Banks defend their measly easy access savings rates

Paloma Kubiak
Written By:
Paloma Kubiak

Major high street banks have been forced to explain why their easy access savings rates are much lower than the current Bank of England base rate of 4.5%.

Savings rates have come under scrutiny from the Treasury committee since the start of the year, following a series of Bank of England base rate hikes from the historic low of 0.1%.

In February, the committee wrote to the major four banks – Barclays, HSBC, Lloyds and NatWest –  questioning how they determine what proportion of interest rate rises to pass on to savings customers, and whether chief executive remuneration is linked to profits from their savings businesses. At the time, they all paid less than 1% on their easy access savings accounts.

And last month, the cross-party group of MPs widened the scope of its campaign for banks to increase the savings rates offered to loyal customers, as it wrote to ‘scale challengers’ quizzing them on their respective rates.

The lenders now under the spotlight include Nationwide, Santander, TSB and Virgin Money which account for a quarter of all personal current accounts.

The MPs asked how the banks and building society how they determine the level of interest rate increases to pass on to savers, and whether they inform their loyal customers that higher alternatives may be available.

Here are their responses:


Debbie Crosbie, CEO, said it has given over £1bn back to members over the last year in better rates and incentives for members.

It also recently announced Nationwide Fairer Share, distributing £340m of its profit to 3.4 million customers, and launched a two-year bond paying a competitive 4.75% AER.

Crosbie said it had managed to do this “through a period of economic volatility and an unusually sharp increase in bank base rate”.

It also offers “a wide choice of deposit accounts” that pay different rates depending on how long customers want to leave their savings alone for.

“Generally, the longer that deposits can be left, the higher the rate. With instant access funds, we can’t lend them so easily to mortgage borrowers, who generally seek fixed term lending. As a result, the market tends to offer higher rates for fixed term deposits because of the certainty and stability they provide,” she wrote.

Crosbie added that the mutual has seen strong deposit inflow of £9bn in the past year as it “pays more than the high street bank average on instant access accounts” and “passes on a significant proportion of base rate increases across our savings range”.


Mike Regnier, CEO, said that the base rate isn’t the only factor when it comes to determining savings interest rates.

“We must also balance pricing against all our fixed and funding costs. All pricing and rate changes are agreed at our weekly pricing forum, chaired by our CFO, where decisions are subject to robust scrutiny from across the business.

“Since the base rate started rising, we have significantly increased the amount we have paid to our savers. It is also worth noting that 89% of our loan book is on fixed term rates, and as such rises in the base rate don’t automatically translate into higher costs for customers – or higher income for us.”

Regnier added: “We are one of the only high street banks that offers cashback and interest on balances up to a specific threshold on our current accounts, which gives customers a chance to earn money on essential spend such as supermarket spending, as well as another account to use for instant access savings, thereby helping customers mitigate some of the pressures of inflation.”

The 123 current account offers 2% on balances up to £20,000, and the Edge current account has a linked savings account paying 4%.


Robin Bulloch, CEO, said it had been a decade since it parted from Lloyds and it offers full banking services to five million customers.

He explained that like other banks, its business model is based on taking deposits and then lending out that money through mortgages and unsecured lending.

“The margin made on the difference between rates offered to savers and those charged to borrowers is used to run the operation – including compliance with regulation – and much of it is reinvested in our business to fund the maintenance and improvement of the services we provide our customers.”

Bullock added that TSB offers “a broad range of savings products” with some paying as high as 5%.

The TSB Easy Saver is its instant access account which offered 0.9% gross and can be opened with £1. It allows unlimited deposits and withdrawals, and 80% of these accounts contain less than £5,000.

Its main current account is the Spend and Save account which encourages regular saving with customers able to set up saving pots, get round ups and text alerts. It pays 2.52% for 12 months with TSB sharing that 700,000 savings pots have been opened since launch in 2020.

Virgin Money

David Duffy, CEO, wrote: “Virgin Money prides itself on offering competitive savings options that are available to both existing and new customers. In the last six months, we have opened 455,000 savings accounts, with an average interest rate of 3.8%.

“We believe that our competitive savings rates are one of the key reasons that Virgin Money saw deposit growth in the first half of 2023. As you may be aware, we are currently a market leader in ISAs, which make up 52.5% of all of our savings balances. Our one-year fixed rate ISA pays an interest rate of 4.33%, our two-year pays 4.40% and our three-year pays 4.41%. At the time of writing these options are some of the most competitive in the market.”

Duffy added that Virgin Money sets interest rates based on a variety of factors.

“This includes the base rate but also includes the level of account access, the complexity to serve and our funding requirements (for liquidity). We must also consider our comparative market position to ensure we do not price products that risk either excess volumes that result in poor customer service outcomes, or move us outside our targeted liquidity levels,” he wrote.

However, he said the Everyday Saver product is priced differently: “The Everyday Saver provides very different features from a normal savings account. While most savings accounts only allow customers to transfer money out to a nominated account (commonly their own current account), the Everyday Saver is a transactional account that customers can use to make payments to anyone they wish and is often used by customers as an alternative if they don’t want a full current account to pay bills.”

Cash languishes in easy access accounts

Around 60% of household deposits are held in instant access accounts. When the committee began its inquiry into retail banks in February, the big four banks offered between 0.5% and 0.65% for easy access savings accounts. Today, the big four offer rates between 0.7% and 1.35%.

Harriett Baldwin MP, chair of the Treasury committee, said: “With the Bank of England confirming the pass through of base rate increases to easy access savings accounts has been unusually weak, it’s clearer than ever that the nation’s biggest banks need to up their game and encourage saving. While other products are available to those who shop around, the measly easy access rates on offer lead us to conclude that loyal customers are being squeezed to bolster bank profit margins.

“We remain concerned that the loyalty penalty is especially prominent for elderly and vulnerable customers who may still rely on high street bank branches.”