Millions of UK savers are being short-changed by the country’s big banks, which offer low interest rates on flexible savings accounts while raking in billions in profits.
Barclays, HSBC, Lloyds, NatWest, and Santander are paying an average of just 1.42 percent on their easy access accounts – far below the market average of 2.9 percent, according to research from Moneyfacts.
This means savers with £10,000 deposited in these accounts are potentially missing out on hundreds of pounds annually.
Despite their low savings rates, the banks have reported bumper profits: Lloyds made £9.64bn in 2023, Barclays £6.43bn, NatWest £5.49bn, Santander UK £3.74bn, and HSBC £4.33bn.
High street banks typically reserve their best deals for fixed accounts that require savers to lock away their money, leaving easy access account holders with lacklustre returns.
The Bank of England’s base rate remains at 4.75 percent, but many easy access accounts offer far less. While savings rates have stagnated, mortgage rates have surged, with the best fixed deals still above 4 percent.
Experts warn savings rates may drop even further, as the base rate is predicted to fall by at least 0.5 percentage points this year.
Andrew Hagger, a personal finance expert, criticised the banks’ lack of appetite for rewarding savers. He said: “The big high street banks rely on the apathy of savers who stay put rather than switch to better deals – even when they could earn twice as much interest.”
Rachel Springall, finance expert at Moneyfacts, described the cuts to flexible savings rates as “disheartening.”
She told the i Paper: “Savers who prefer to have their cash at hand will unsurprisingly feel disgruntled as the situation worsens. Banks, however, prove they can offer competitive returns on fixed-rate bonds where money is locked away.”
Banks came through the cost of living crisis for their customers with bumper profits. Many took advantage of increases in interest rates to boost their profit margins on loans and savings.
People looking for competitive rates are being advised to consider smaller, lesser-known providers. Chip and Atom Bank currently lead the market with easy access accounts offering up to 4.85 percent interest, though some restrictions apply.
Savers willing to lock away their money can secure similar returns through fixed accounts, such as Vida Savings’ one-year fixed-rate deal at 4.77 percent.
James Blower, founder of The Savings Guru, said: “Big banks have long paid savers well below the best rates. They’re quick to increase mortgage rates but crawl when it comes to improving savings rates.”
With high living costs and stagnant savings rates, pensioners and households struggling financially are feeling the squeeze. Experts urge savers to shop around.
Anna Bowes of Savings Champion warned: “Loyalty doesn’t pay. Savers should regularly review and switch accounts to avoid leaving money to languish below inflation.”
In response to criticism, the banks defended their practices, citing a range of products and overall value to customers. Barclays and Nationwide declined to comment.
Santander said: “We are committed to delivering value for our savings customers and offer a range of competitive savings products, including our Regular Saver paying 5 percent.”
HSBC UK said: “While we do review our rates in line with market conditions, we are committed to supporting customers by providing overall value on our savings accounts and offer a range of different types of account to suit our customers’ varied needs.
“The value we offer goes beyond interest rates to include convenience, simplicity, and organisational and financial stability of the bank.”
NatWest said: “We regularly review our interest rates. Our easy access accounts are our most flexible and offer customers immediate access to their funds with no conditions.
“We offer a range of products and regularly encourage customers to review the interest rates on their savings accounts to ensure they are getting the most for their money and have a suitable account for their needs.”
