Ditch the high street: savers could earn extra £7bn with smaller rivals
British savers are missing out on £7bn of interest a year by sticking with big-name banks.
High street lenders still hold the majority of savers’ cash despite paying some of the lowest interest rates, according to a study by the Centre for Economics and Business Research (Cebr).
The ‘big 5’ banks – Barclays, HSBC, Lloyds, RBS and Santander – hold £827bn of the £1.3trn in household deposits, or 63% of the market.
The Cebr research, on behalf of savings platform Flagstone, says savers with the ‘big 5’ make a maximum of £3.4bn of interest on their cash savings in the next 12 months, but could earn as much as £7bn if they switched to leading rates from ‘challenger’ rivals.
The report said inertia among savers had peaked, with a near-record £170bn of savings sitting in accounts paying no interest at all – up from £33bn in 2008.
The amount in instant access accounts, which typically pay the lowest rates of interest, has shot up from £500bn to £746bn in the past three years.
A survey of 4,200 UK adults revealed that more than four in ten savers would consider switching accounts if they could achieve an extra one percentage point on their savings.
But many challenger banks already offer rates which are at least one percentage point higher than their ‘big 5’ rivals, suggesting savers are not aware of the deals on the market, or are put off by the hassle of opening and maintaining new deposits.
Andrew Thatcher, co-founder and co-managing partner of Flagstone, said: “The fact that more than more than £1 in every ten of the UK’s household deposits is currently languishing in an account which pays no interest at all, reveals the extent to which a decade of persistently low rates in the high street has resulted in widespread inertia amongst the nation’s savers.
“The data shows that many people are not moving their savings to a different provider these days even though there is a pretty sizeable difference in the rates offered across providers. This suggests that people are put off of proactively managing their savings because of the time that it takes and the hassle involved in opening new accounts.”