High street banks still lagging behind with paltry savings rates, Which? analysis finds
The consumer champion's analysis examined savings rates between January and June 2024 on six types of accounts: instant access savings accounts and ISAs, one-year fixed-rate savings accounts and ISAs, and five-year fixed-rate savings accounts and ISAs.
The gap between traditional high street banks and newer challenger banks and building societies was most pronounced with instant-access savings accounts. In January, major banks were averaging a mere 1.9 per cent on these accounts. In contrast, building societies averaged 2.9 per cent, and challenger banks provided 3.3 per cent.
By June, the average rate for major banks fell to 1.6 per cent, while the rates for building societies and challenger banks remained stable. Among instant access accounts in June, Lloyds ranked worst of the major banks, and third worst overall, with a meagre rate of 1.4% on their instant-access account.
When Which? checked rates again in July the situation with Lloyds Bank had not improved from 1.4%. Other major brands fared only slightly better, with Halifax paying 1.5%, TSB 1.5%, Barclays 1.65%, Santander 1.7%, Co-operative Bank 1.81%, and HSBC 1.98%.
In stark contrast, challenger bank Cynergy Bank provided a rate of 4.94% in July, the highest instant-access rate on the market.
As part of its deep-dive analysis, Which? also ranked instant access accounts for every provider against one another each day between 1 January and 3 June. Lloyds had the worst ranking of any of the major banks over this period, and one of the worst overall, averaging 90th out of an average field size of 92.
Despite the overall disappointing rates, there were instances of table-topping rates on the high street. Ulster Bank Loyalty Saver currently offers 5.2%, while Santander briefly offered 5.2% earlier this year. However, high-rate savings accounts at major banks are often only available to current account holders.
Few high street banks offer longer-term fixed-rate accounts. Only Halifax was offering a five-year fixed-rate account to new customers at the beginning of June, although its rate of 3.8% is considerably less than those leading the market.
According to Which?’s regularly updated best savings accounts guide, the current best one-year fixed rate on the market is the Union Bank of India UK with the highest rate of 5.4%. Meanwhile, Birmingham Bank excelled in the five-year fixed savings category, offering a rate of 4.61%.
In March last year, MPs from the Treasury Select Committee issued a scathing verdict on the low savings rates provided by the UK’s largest banks. Which?’s findings come nearly a year after the FCA issued a 14-point action plan in July 2023, putting banks on notice that their behaviour would no longer be tolerated, with the next review set to be published soon.
The plan requires providers offering the lowest rates to justify how this provides fair value to customers and threatens robust action for those who are unable to. The regulator subsequently ordered nine firms to provide justification for their instant-access rates.
It is imperative that the FCA’s next six-month progress review takes robust action where firms cannot justify fair value, especially concerning the practices of big banks. While the base rate has remained unchanged for nearly a year, savings providers have acted too slowly in improving rates for their customers.
Sam Richardson, Deputy Editor of Which? Money, said:
“It is completely unacceptable that big banks continue to shortchange savers despite repeated warnings from Which?, MPs and the regulator.
"As savers face the prospect of base rate cuts, banks will likely be quick to implement any reductions, yet our research shows they have dragged their heels in responding to calls for better rates.
“In its upcoming review, the regulator must take decisive action against firms that have failed to provide fair value, leaving them in no doubt that they will intervene against any future unfair practices.”
-ENDS-
Notes to Editors:
FCA update on cash savings - December 2023
Research
Average figures are based on analysis of Moneyfacts data covering instant-access (often referred to as easy access) and fixed-rate savings accounts between January and June 2024. Rates are based on an initial deposit of £10,000, an amount picked to exclude the fewest accounts possible. Where a provider offered more than one account per category, the highest-paying account was used.
Which? also checked rates available on July 15.
Instant-access accounts with withdrawal restrictions and any savings accounts with opening restrictions – for example, those you can only access if you have a current account with the same provider were excluded from analysis.
NatWest’s instant-access rate on July 15 was 1.74%, but we excluded them from the analysis as their account has opening restrictions.
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