Thanks to dismal savings rates, savers can be forgiven for thinking that there is little to gain from switching savings accounts away from familiar high street providers. However, our latest research can reveal that this is not the case, and that savers would actually be able to achieve far better rates of return from the newer kids on the block.
The figures speak for themselves. The average easy access rate from high street providers comes in at just 0.44%, while the same account from challengers gives you an average return of 0.92%, over double the high street counterpart. It's a similar story in the fixed rate bond sector, which just shows that, despite savings rates falling across the board, "challenger banks continue to trump their high street competitors and maintain their hold on the best buy tables", said Charlotte Nelson, finance expert at Moneyfacts.
"Indeed, the worst easy access account offered by high street providers now pays just 0.05%, so it's not surprising that the average easy access account offered by high street banks pays a significant 0.48% less than the average rate paid by challengers.
"The slow desertion of some of the UK's most well-known brands from the best buy charts is shocking and has significantly impacted savers' returns as a result. It all boils down to the fact that these providers simply do not need savers' money to fund their borrowing.
"However, as challenger banks are still relative newcomers to the market they need to get savers' attention, and the best way to do that is by offering attractive savings rates."
Knowing that challenger banks offer higher rates of interest is all well and good, but would you put your money in a bank you've never heard of? One of the biggest hurdles challenger banks face is getting savers to actually trust their brand, but really, their lack of pedigree shouldn't leave you unwilling to consider them.
"There really isn't any reason to fear the unfamiliar," added Charlotte, "for the majority of challenger banks have a UK banking licence and some have already become well-established."
Don't be fooled into thinking that loyalty pays, either – instead, it's quite the opposite. Indeed, high street providers are using savers' reluctance to switch accounts to their advantage and are actively backing away from active competition, so apathy will get you absolutely nowhere.
Quite simply, "savers should vote with their feet and opt for better rates provided by challengers", concludes Charlotte. "For instance, the best two-year fixed rate bond from a high street provider pays just 1.25% yearly, but savers could earn 2.20% by opting for a challenger brand.
"In today's dismal savings landscape challenger banks offer savers a beacon of hope and the opportunity to secure a market-leading deal. And with loyalty no longer being rewarded by more familiar providers, now is the time for savers to muster the will to reject poor returns and change account."
If you need any more reason to give challengers a go, check out the top savings accounts on the market – you'll soon notice the lack of high street names.
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.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.