UK’s biggest banks fail to keep up with top savings rates

Meanwhile, the Financial Conduct Authority launches a new campaign, encouraging savers to switch.

The UK’s big five high street banks still fail to offer competitive rates on some of their easy access savings accounts, according to recent analysis using the Moneyfacts Consumer Duty Audit Tool for Savings.

This is despite continued scrutiny over whether providers passed on last year’s Bank of England base rate rises to savers.

When the analysis was conducted, the accounts in question all paid less than 2.00% gross and sat in the bottom quartiles of the market. By contrast, the average easy access rate currently sits at 3.18% with many of the top easy access savings accounts paying over 5.00%.

“The Financial Conduct Authority’s regulations around Consumer Duty directed financial services institutions to offer fair value, and the big banks are still failing in some areas to meet those expectations,” explained James Hyde, Spokesperson for Moneyfacts.

“With new rules regarding closed accounts coming into effect this summer, it remains to be seen if there is more urgency to improve rates going forward,” Hyde added.

This analysis coincides with the Financial Conduct Authority (FCA) recently launching a new campaign, which encourages savers to shop around for better savings rates.

Falling behind

While many providers increased returns on their savings accounts in response to consecutive base rate hikes last year, with average rates now sitting significantly higher than a year ago, the big banks are falling behind.

Of the big five, HSBC’s Flexible Saver currently offers the highest easy access rate but pays only 1.98%.

Meanwhile, Santander slashed the rate paid by its Easy Access Saver from 2.50% to 1.70% in recent months.

This particular account “sits alongside the equivalent products from Barclays, HSBC and NatWest, towards the bottom of the third quartile”, revealed Hyde.

As for Lloyds Bank, its Easy Saver occupies the bottom tier, paying just 1.40%.

Data correct as of 12 February 2024. Deals available to new customers and includes accounts that allow multiple withdrawals without penalty. *Reverts into Everyday Saver after 12 months, which currently pays 1.20%.

The picture looked slightly better for fixed rate bonds, with all five banks offering a deal in the top quartile of the market back in November 2023.

However, Barclays Bank is now the only one of these providers to remain in the top quartile as the other banks’ offerings have failed to keep up with the competition.

Compare and switch

As part of its recently launched campaign, the FCA said only half (52%) of savers had switched or were considering switching their savings account.

“We know that people can be put off switching for a variety of reasons, but they could be making their money work harder,” commented Sheldon Mills, Executive Director of Consumers and Competition at the FCA.

“There are some great rates out there and it could take as little as five minutes to find a better deal,” he continued.

Using data from Moneyfactscompare.co.uk, the FCA noted more than 300 easy access accounts offered rates in excess of 3.00% as of 19 February 2024, while 170 paid over 4.00% and 37 had rates above 5.00%.