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3 Feb 2021

Local savings: can you get a better rate depending on where you live?

Find out if you can cash in on the savings postcode lottery

While we're all staying local during the current coronavirus lockdown, there's evidence to suggest that it could pay to keep your savings in the local area, too.

We've found several instances where smaller banks and building societies offer higher interest rates to those living in the local area compared to accounts that are available nationwide.

At a time when, according to data from Moneyfacts, the average interest rate on an instant-access savings account is just 0.17%, it's more important than ever to make sure the interest you're receiving is as competitive as possible.

Here, Which? reveals where to find the top nationwide and regional savings rates.

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Top-rate cash Isas and savings accounts

The table below shows the top-rate accounts that are available nationwide, by order of term.

The account information is in accordance with terms set out for new customers.

Further information on each of the accounts listed below can be found on Which? Money Compare, or on the provider's website.

Account typeAccountAERMinimum initial deposit
Five-year fixed-term savings accountGatehouse Bank Five-Year Fixed-Term Deposit1.5% (EPR*)£1,000 minimum initial deposit
Five-year fixed-term cash IsaGatehouse Bank Five-Year Fixed-Term Cash Isa1.3% (EPR*)£1,000 minimum initial deposit
Four-year fixed-term savings accountPunjab National Bank Four-Year Fixed-Term Deposit1.15%£100 minimum initial deposit
Four-year fixed-term cash IsaPunjab National Bank Four-Year Fixed-Rate Cash Isa0.95%£1,000 minimum initial deposit
Three-year fixed-term savings accountAl Rayan Bank 36-Month Fixed-Term Deposit1.3% (EPR*)£5,000 minimum initial deposit
Three-year fixed-term cash IsaGatehouse Bank Three-Year Fixed-Term Cash Isa0.9% (EPR*)£1,000 minimum initial deposit
Two-year fixed-term savings accountAl Rayan Bank 24-Month Fixed-Term Deposit1.15% (EPR*)£5,000 minimum initial deposit

*Expected profit rate.
Source: Moneyfacts. Correct as of 3 February 2021, but rates are subject to change.

Several of the top-rate accounts in the table above are offered by Islamic banks, which offer an expected profit rate (EPR) rather than an annual equivalent rate (AER). This means the advertised rate is not guaranteed - however, we've never heard of an instance in the UK where an Islamic bank has not paid the rate that's been advertised.

As rates continue to fall across the board, there's now just 1% difference between the top-rate instant-access savings account and the top-rate five-year fixed-term savings account.

This isn't much, considering you have to lock your money away for such a long time to secure the higher rate - however, if rates continue to fall it might be better to get what you can now.

How do local savings rates compare?

Smaller banks and building societies, which are based in concentrated areas in the UK, can sometimes afford to offer their local customers more competitive rates than big banks.

This is partly because smaller companies have fewer stakeholders, and can therefore use their profits more freely, including to reward existing customers or entice new ones.

It's also because they're more likely to need to use the savings deposits to fund their borrowing, rather than having to borrow from the Bank of England and repay with interest.

The differences aren't notable across all account types, but we've found a few where it can pay to stay local.

Instant-access accounts

We've found several accounts for local customers that beat the top rates on offer in the table above - but there are several caveats you'll need to bear in mind:

  • Ipswich Building Society Stepping Stone Isa: 1% AER: for existing members and/or those who live in postcodes starting with IP, NR, CO, CM, CB and PE, aged 16-20 with a £10 minimum initial deposit.
  • Earl Shilton Building Society Heritage account:0.7% AER: this account is for existing members and/or those who live in postcodes starting LE, CV9-13 and DE11-15, aged 50 or over. You're allowed up to four withdrawals per year and can open an account with a £1,000 minimum initial deposit.
  • Earl Shilton instant-access cash Isa: 0.6% AER: this account is for existing members and/or those who live in postcodes starting LE, CV9-13 and DE11-15; unlimited withdrawals; £10 minimum initial deposit.

Find out more:how to find the best savings account

Regular savers

While NatWest's regular saver pays 3% AER - beating the local-only accounts below - it's only paid on balances up to £1,000, so the amount of interest you can earn is very limited. Aside from this account, the next-best regular savers are all offered locally:

  • Hanley Economic Building Society Home Deposit Saver: 2.45% AER. This regular saver is for those who are saving for a deposit for their first home, and who live within 25 miles of the provider's head office in Stoke-on-Trent; £100 minimum initial deposit; regular savings of £100-£500 must be received each month; the account can be held for up to three years.
  • Vernon Building Society Regular Saver Isa: 1.45% AER. For locals who live within 25 miles of Stockport; £500 minimum initial deposit; regular savings of £25-£500 must be received each month.
  • Earl Shilton Building Society Regular Monthly Saver: 1.4% AER. For existing customers and/or those with postcodes starting LE, CV9-13 and DE11-15; £10 minimum initial deposit; regular savings of £10-£500 must be received each month; two withdrawals permitted per year.

Children's accounts

The top local rates we've found below aren't market-leading, the account from Melton Building Society is only just topped by a couple of nationwide accounts, including Principality Building Society's Dylan Regular Saver (2.5% AER), and Penrith Building Society's regular savers paying 2.45% AER.

  • The Melton Building Society Wild Ones Young Savers, 2.43% AER: for existing customers who have been members for five years or more and/or those who live in Leicestershire, Nottinghamshire, Lincolnshire or Rutland; £5 minimum initial deposit.
  • Hinckley & Rugby Building Society Starter 4 Ten children's savings account, 1.8% AER: for savers under 18; £10 minimum initial deposit; available to those with postcodes starting LE, CV, NN, PE, NG, DE, B, ST, WV, DY, WR, WS, OX15, OX16, OX17, LN4, LN5, LN6.
  • Mansfield Building Society Young Regular Saver, 1.75% AER: for existing customers with a minimum of one year's continuous membership and/or locals who live in Nottinghamshire, Derbyshire or South Yorkshire; £1 minimum initial deposit.

Find out more:best children's savings accounts

Should I opt for a regional account?

This will largely depend on where you live, and whether you're in the catchment area for a competitive account that's only available to locals.

You should also remember that it's not all about the interest rate. Before you switch to any new savings account, make sure it works for you and your circumstances. For instance, check for any withdrawal terms and consider whether you'll be able to stick to them.

Factor in whether it can be managed in the way you want; smaller providers may not have high-spec mobile banking apps, but may instead focus on telephone or in-branch banking, so you should make sure whatever services are on offer suit you.

If there aren't any local banks or building societies near you with top-rate offers, you can search through hundreds of savings accounts and cash Isas with Which? Money Compare.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Money Compare is a trading name of Which? Financial Services Limited.