The average easy access rate increased to 2.11% in June 2024, up from 1.66% recorded in July 2023 before the Financial Conduct Authority’s (FCA) cash savings market review.
It revealed there were 174 instant access/no notice products paying 4% interest or more, with deposits remaining “broadly stable” at £909bn.
However, the regulator estimated that savers will see an additional £4bn a year in interest payments.
Meanwhile, savers have continued to move deposits into higher paying fixed-term and notice accounts, with these balances increasing by £29bn to £274bn between July 2023 and June 2024.
The FCA also noted that from July 2023 to June 2024, the volume of deposits held in non-interest paying bank and building society accounts reduced by £14bn to £252bn.
Market interest rates
As part of its cash savings market and fair value review, the FCA worked with the largest nine firms – Lloyds Banking Group, HSBC, NatWest Group, Santander UK, Barclays, Nationwide Building Society, TSB Bank, Virgin Money UK and The Co-operative Bank – and said that despite improvements “our review has shown that many firms have found the assessment of value challenging and the largest firms generally continue to pay below the market average for standard easy access products”.
It noted that “much higher rates are available than the market average”, including many that currently pay 5% or higher for both easy access and fixed-term deposits.
Further, as the base rate has started to fall, this has impacted the interest rates offered.
“We will continue to closely monitor firms’ future savings rate changes. However, we expect that our interventions to improve competition and support better communications will continue to have a positive impact. Savers who are able to switch should be able to continue to access the best deals,” it added.
The FCA also looked at “differential outcomes” in light of the Consumer Duty and whether products provide fair value for customers in each group.
Here, the FCA said consumers with characteristics of vulnerability may have additional needs and be at greater risk of harm if things go wrong. The Consumer Duty requires firms to pay particular attention to the needs of these customers. But the watchdog revealed it “did not see evidence that many firms had fully assessed the outcomes for customers with characteristics of vulnerability”.
‘More rewarding home for your cash’
Mark Hicks, head of Active Savings, Hargreaves Lansdown, said: “The high street giants have turned a friendlier face to savers over the past 12 months, but this doesn’t mean they’re your friends. You still need to run from the giants as quickly as possible, and find a more rewarding home for your cash – especially at a time when rates are falling.
“Overall, the FCA review of the market seems to have made a real difference – supported by the Consumer Duty rules. It helped persuade the high street giants to stop prevaricating and pass on at least some of the benefit of higher rates. As a result, average rates at these banks rose around twice as fast as the Bank of England rate in the year following the review.”
Hicks added: “However, these rates are still languishing well below the most competitive savings accounts and cash ISAs on the market. The FCA also pointed out that as the base rate has started to fall, the banks have cut savings rates, and it’s going to have to keep its eye on the high street giants to ensure rate cuts are fair.”
