Banks shortchanging savers with low saving rates

The consumer advice organisation looked at six types of accounts, namely instant access savings accounts and Isas, one-year fixed-rate savings accounts and Isas, and five-year fixed-rate savings accounts and Isas. These were only included if they were available to customers for at least 12 months within three years.  

As part of this work, it found that the gap between traditional high street lenders and challenger banks and building societies was widest when it came to instant-access savings accounts – with challenger banks paying an average rate of 0.57% over the three-year period, while building societies paid 0.42%. High street banks, meanwhile, average 0.16%.  

Despite these competitive rates, challenger banks have struggled to prise customers away from bigger and more established names – with researchers from Hargreaves Lansdown suggesting 32% of people though interest rates were too low to bother switching banks, while seven percent thought high street banks are safer.  

However, Which?’s analysis suggests savers could earn £312 more over a year on a £10,000 deposit by putting their money in the market-leading instant-access account.  

These figures come as the Treasury Select Committee wrote to high street banks to ask them what proportion of their interest rate rises are passed on to their saving customers.  

Which? Money editor Jenny Ross said: “With millions of consumers still feeling the impact of an unrelenting cost of living crisis, it’s become even more important to get better returns on savings accounts.  

“Yet, our research shows that established high street banks are shortchanging customers by potentially hundreds of pounds a year. If the FCA’s Consumer Duty is worth the paper it’s written on, the regulator will clamp down heavily on firms offering unjustifiable savings rates.  

“Our advice is simple: if you’re not satisfied with the rates you’re currently receiving, now’s the time to switch.”