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Big banks still fail to offer competitive savings rates

Big banks still fail to offer competitive savings rates
Matt Browning
Written By:
Matt Browning

Five of the UK’s biggest banks are still failing to make easy access savings rates more competitive for customers, data reveals.

Barclays, HSBC, Lloyds, NatWest, and Santander rank in the bottom quartile of providers for flexible easy access accounts, with all the rates on offer paying less than 2% on savers’ cash.

Among the major providers, only Barclays offers a fixed-rate bond in the top quartile on the market, with a rate of 4.65% AER. Yet, in November 2023, all five banks offered at least one product in the top tier of providers.

Data from Moneyfacts showed many of the leading providers’ top fixed bond rates had fallen into the second quartile, with a number coming with certain conditions such as requiring customers to hold a current account.

Treasury Select Committee quizzes banking chiefs

Last March, the chief executives of the big banks were called to the Treasury Select Committee to answer if their savings products provided “fair value” to customers.

This involved MPs quizzing them on whether customer inertia is being exploited and what the providers are doing to notify savers of the higher rates available.

Meanwhile, a study from Which? in November found challenger banks and building societies were regularly offering much better savings rates than the big banking brands.

In the year from October 2022, the base rate rose by three percentage points from 2.25% to 5.25%, but, on average, the big banks only upped their rates to 1.98% from 0.42%.

‘Up to customers to switch if loyalty isn’t rewarded’

James Hyde, spokesperson at Moneyfacts, said: “Despite the continued focus on the passing of interest rates on to savers, the big five banks are still yet to make their easy access rates more competitive in relation to the rest of the market.

“The big banks’ most accessible no-notice accounts remain in the bottom quartiles of the market, with the only rate change to these products in recent months being Santander slashing the interest paid on its Easy Access Saver from 2.50% to 1.70%. That account sits alongside the equivalent products from Barclays, HSBC, and NatWest, towards the bottom of the third quartile, while Lloyds Bank’s 1.40% offering does occupy the bottom tier.”

Hyde added: “The Financial Conduct Authority’s (FCA’s) regulations around Consumer Duty directed financial services institutions to offer fair value, and the big banks are still failing in some areas to meet those expectations. With new rules regarding closed accounts coming into effect this summer, it remains to be seen if there is more urgency to improve rates going forward.

“As always, it is down to customers to proactively monitor savings rates and switch if they feel their loyalty is not being adequately rewarded.”

For the leading savings rates on the market, read YourMoney.coms weekly round-up of the best deals here.

Big banks’ easy access accounts

The table below (source: Moneyfacts) reveals the savings accounts and rates offered by the big five banks:

Provider Account Gross rate at £10k
Barclays Bank Everyday Saver 1.65%
HSBC Flexible Saver 1.98%
Lloyds Bank Easy Saver 1.40%
NatWest Flexible Saver 1.74%
Santander Easy Access Saver 1.70%**
*Deals available to new customers and includes accounts that allow multiple withdrawals without penalty. **Reverts into Everyday Saver after 12 months, which currently pays 1.20%.

Based on a £10,000 deposit, gross rates. Data correct as of 12.2.24.