Flexible savings rates from big banks continue to fall short

While the big banks’ easy access savings rates have room for improvement, their fixed-rate bonds are more competitive.

Savers looking for a flexible easy access account from a major bank (Barclays Bank, HSBC, Lloyds Bank, NatWest, Santander) will find that most sit in the bottom quartiles of the market. This is according to data from the Moneyfacts Consumer Duty Audit Tool for Savings.

Easy access accounts from the big banks lagged behind the market-leading providers in August 2023, and there has been little improvement in this sector since then, despite the Consumer Duty rules introduced by the Financial Conduct Authority (FCA) last year.

However, more encouragingly, many of the fixed-rate bonds offered by the big banking brands feature in the top two quartiles of the market. Although they don’t pay the highest fixed savings rates, it means that savers who prefer to keep their hard-earned cash with a well-known bank can still receive a relatively competitive rate.

“There is a clear disparity between the positioning of products from the biggest banks on their fixed rate bonds compared to their most flexible accounts,” commented Rachel Springall, Finance Expert at Moneyfacts.

“This shows why savers should avoid putting all their cash with one brand for convenience, as better rates could be available elsewhere which can depend on the type of accounts,” she added.

Flexible rates fail to improve

As of 2 September, HSBC’s Flexible Saver (Standard) paid 1.98% (gross), which was the highest rate of the easy access accounts offered by the big five banks. This was followed by Santander’s Easy Access Saver paying 1.70% (gross).

Despite offering some of the better rates among the big banks, both accounts sit in the third quartile of the market and fall well short of the leading easy access savings accounts that can offer rates in excess of 4.50% AER.

“The big banks’ most flexible accounts pay an average rate of 1.64% gross between them, which is significantly lower than the market average rate of 3.08% gross, based on a £10,000 deposit,” Springall explained.

“This clearly demonstrates why savers need to look beyond the most familiar brands, as their loyalty is not being repaid,” she continued.

*Deals available to new customers and includes accounts that allow multiple withdrawals without penalty. Based on a £10,000 deposit, gross rates. Data correct as of 2 September 2024.

**Reverts into Everyday Saver after 12 months.

It’s worth noting that these major banks may offer higher-paying easy access accounts to their existing customers, for example.

Fixed rates perform better

Although the flexible savings accounts offered by the big high street banks pay relatively low interest rates, their fixed rate bonds offer more competitive returns.

For example, HSBC’s one-year Fixed Rate Savings pays 4.45% AER while Barclays Bank’s 1-Year Fixed-Rate Bond - Issue 118 pays 4.30% AER (correct as of 2 September).

These rates place the accounts in the top quartile of the one-year fixed bond market, and accounts from other major banks also feature in the top half of our fixed bonds charts.

As a result, while there are many other providers that can offer higher rates, savers who choose to deposit their money in a fixed bond from a high street bank won’t be at such a disadvantage than if they saved in one of their easy access accounts.

Time to review rates

While providers, including the big banks, need to make sure they’re offering fair value to consumers with their savings accounts (and other services), savers should still be proactive in managing their finances and choosing where to deposit their savings.

It’s always worth reviewing the rate on your existing accounts and comparing them with the top savings rates to see if you could be getting a better return on your money.

Even though some of the providers offering the top rates may not be household names, Springall points out that “so long as they are protected by the Financial Services Compensation Scheme (FSCS), there is little reason to disregard them”.