Savers who stayed loyal to their high street bank lost £13.6bn in a year through missing out on better interest rates, research reveals.
This figure is based on the £257.8bn lying in accounts that are not accruing any interest at all.
Hargreaves Lansdown based the loyalty penalty on switching to an easy access account having an interest rate of 5.15% AER.
Alarmingly, the £13.6bn total is almost double the £7.4bn UK savers were missing out on claiming last year.
The reluctance of savers to get the best rate available is causing this expensive black hole, according to Hargreaves Lansdown.
More than a quarter of the 2,000 respondents surveyed by the savings company said they had never switched accounts for a better rate, while nearly half (49%) had no plans of moving their funds at all.
The most popular reason for staying with their bank was because they believed they had the best rate already, with over a quarter (28%) feeling that way. A similar amount (27%) decided to stay put because they trust their bank and 17% were put off by ‘the hassle’ of switching accounts.
Despite the Bank of England hiking the base rate to 5.25%, many of the established high street banks have not followed suit and on average offer 1.98% AER to customers.
As billions of pounds fester in the easy-access accounts of the big banks, savers have been urged to consider broadening their horizons to enjoy the ‘much higher’ rewards from challenger banks.
‘Miserable’ levels of interest are costing savers a fortune
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Loyalty is hugely overrated – at least when it comes to our savings. Sticking with easy-access branch accounts run by the high street giants, paying miserable levels of interest, is costing us a fortune.
“Even if we just switched the money collecting dust in accounts paying no interest at all, we could make £13.6 billion in interest in a year, and if we switched those paying rock bottom rates in high street accounts, we could make billions more.”
Coles added: “Now, the biggest motivation for people to stay put is because they think they already have the best possible rate (28%). This may be the case for some, but given that the lion’s share of money is still in the easy-access accounts of the big high street giants, and the vast majority of them pay a fraction of what’s available from newer online banks, there’s a reasonable chance others just don’t realise how much more rates have risen elsewhere.
“We know the high street giants well, so it’s easier to feel more comfortable leaving our money with them, rather than using a less-well-known online bank. However, these newer banks have to follow the same rules as those on the high street to be allowed to operate in the UK.”
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