Challenger banks beat the big names - Savings - News - Moneyfacts


Challenger banks beat the big names

Challenger banks beat the big names

Category: Savings

Updated: 18/06/2015
First Published: 17/06/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Have you taken a look at our best buy charts recently? If so, you've probably noticed the lack of big names. Challenger banks are definitely taking over, particularly in terms of savings rates, so it could be time for you to consider the alternatives.

Low rates, little motivation

Many of the biggest high street banks – think Barclays, Halifax, HSBC, Lloyds Bank, Nationwide, NatWest, RBS and Santander – offer pitifully low savings rates, with there being little motivation for them to compete. Analysis suggests that this is the result of the Funding for Lending Scheme, launched by the Government in 2012 to offer banks access to cheap funding that they could lend out in the form of mortgages.

This meant banks had no need for savers' cash to boost their funding reserves, so savings rates fell – quickly. However, challenger banks didn't take part in the scheme, and when you consider that many have popped up in the last couple of years, it's no wonder they're offering much higher rates.

"High street providers have been steadily deserting the savings best buys charts, being consistently out of the tables for the last two years," said Charlotte Nelson, finance expert at "Unfortunately they don't seem to be particularly worried about this, using savers' reluctance to change providers to their advantage – with savers unwilling to move accounts, poor rates and the dominance of the big banks in the savings market will remain."

Get a better deal!

Moneyfacts' figures show that the average easy access account from high street providers is just 0.63%, but challenger banks offer a much better rate of 1.02%. This stark difference is further highlighted when looking at the best deals available – the top paying two-year fixed rate bond is currently from the lesser-known Al Rayan Bank, paying 2.30%, whereas Lloyds Bank offers just 1.05%.

That's a massive 1.25% less, so why put up with it?! Don't stay put out of habit, loyalty or apathy – it's time to vote with your feet. "Savers need to fight back and move away from traditional banks to the new challenger brands out there," added Charlotte. "Many of the brands in today's best buys are new to the market and are relatively unknown, but they provide savers with the best chance of achieving a market-leading rate.

"It is understandable that many are wary of the newer savings providers, but if they are protected by the Financial Service Compensation Scheme, then there is little reason for nerves. Perhaps if savers started to look elsewhere, this may act as a catalyst for high street providers to offer better returns, too."

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Savings being used as a festive financial buffer

Good news from RCI Bank UK – its latest research shows that many of us are saving more than we were a year ago, but the question is, will you be dipping into that buffer to cover the cost of Christmas?

6 of the best easy access savings accounts

Easy-access savings accounts are as simple as they sound – they allow you to access your money whenever you need it, without having to give advance notice, and they also allow you to pay into them at any time. Here are six of the best.

Start saving for Christmas… 2017!

Christmas is just around the corner and our annual festive splurging is starting to step up, but are you prepared? It may be too late to start saving for this year’s festive spend, but it’s never too early to start for next year’s!