Why Don’t The Big Banks Want Your Cash | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 14/10/2021

Despite average rates on easy access savings accounts increasing month-on-month, savers with the biggest four high street banks may still find they are earning just 0.01% AER on their savings.

Of the 48 easy access savings accounts that pay 0.01% or less, 36 are high street banks and among these are the top four biggest banks – Lloyds, HSBC, Barclays and NatWest. Meanwhile, all the top 10 highest paying easy accounts in our chart open to new and existing customers come from either challenger banks or building societies – with six accounts from challenger banks.

Why are the big banks offering low saving rates?

A combination of an excess of deposits and savers continuing to save money into low-paying savings rates has resulted in recognised high street banks not needing to compete for savings deposits, and continuing to offer rock-bottom rates as a result. Derek Sprawling, savings director at Paragon Bank, said: “Despite the recent uptick in rates in the savings market, there is still a large disparity between average interest rates and best-buy rates. The most recent Moneyfacts Treasury report analysis showed that instant access average rates still hover around the 0.18% mark – less than a third of those making up the best-buy tables.

“Our marketing analysis shows that this disparity is driven by the dominant high street banks, which have been offering very low rates throughout 2021 and pull the averages down. The big banks continue to account for most of the deposits currently being saved in easy access accounts, which is reflected in the fact that 72% of balances continue to receive a rate of 0.1% or less. This is driven by customers continuing to save money in low-rate accounts with high street banks because they have given in to inertia, or because of the convenience of saving in an account linked to their main account. It’s important for savers to remember that in this digital age, opening and operating a non-linked account that offers a competitive rate is easy and straightforward.

“Throughout the pandemic, households have also been piling money into non-interest bearing current accounts, and this is also contributing to this trend. Since April 2020, balances held in non-interest bearing current accounts grew by close to 30% overall, making this segment the fastest growing across the deposit market. With most people holding a current account with a big bank, the growth of this category is also contributing to the high street banks’ deposit requirements.”

Savers switching from a lowest paying easy access savings account to a top paying one will find they are able to substantially increase the amount of interest they earn on their savings. For example, someone with £10,000 deposited into an easy access account paying 0.01% will earn just £10 per year, however, if they switched to an account paying the top rate of 0.65% AER they would be able to earn £65 per year.

When looking to switch easy access savings accounts, however, savers should be aware that some accounts have restrictions on when and how many withdrawals can be made. Savers can see what withdrawal restrictions are on easy access savings accounts, as well as compare all the best rates on our easy access savings charts.

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. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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