A gap of 0.31% might not sound like something to lose any sleep over. If you had a balance of £10,000 in the bank, you would only lose out on £31 per year by sticking with the lower rate.
However, it raises a broader issue about savings inertia. Customers who don’t proactively shop around are losing out.
The best easy-access savings accounts are currently offering rates north of 5%. Neither the average closed rate nor the average live rate looks particularly attractive in this light.
MoneyWeek’s round-up of the best deals on the market reveals Cahoot is currently paying the top easy-access rate at 5.2% AER, however this only applies to balances up to £3,000.
Chase is paying the second-best rate at 5.1% on balances up to £1 million (but bear in mind that the Financial Services Compensation Scheme only protects savers for balances up to £85,000). This deal includes a 1% bonus that will run until January next year.
Meanwhile, the biggest banks are paying less than 2% on their most flexible savings accounts, Moneyfacts reveals.
Swipe to scroll horizontally
Provider
Account
Gross rate at £10k
Barclays Bank
Everyday Saver
1.65%
HSBC
Flexible Saver
1.98%
Lloyds Bank
Easy Saver
1.40%
NatWest
Flexible Saver
1.74%
Santander
Easy Access Saver
1.70%
Source: Moneyfacts.
It is worth mentioning that many of the big banks offer better rates for customers who sign up to membership schemes. For example, Santander Edge customers can earn up to 7% interest (AER) on their savings.
The downside is that there are some hoops you will need to jump through to qualify.
You would need to open a Santander Edge current account, which comes with a £3 monthly fee. You would also need to pay at least £500 into your current account each month and have two active direct debits.
What’s more, the linked savings account only pays interest on balances up to £4,000. Furthermore, a portion of the 7% interest rate is a bonus rate which is only available for the first 12 months after opening the account.
Lots of accounts come with conditions like these, so it is important to read the small print carefully before moving ahead.
“Building societies and challenger banks continue to work hard to entice new deposits and reward loyal customers so they are worth comparing against the more familiar high street brands,” says Rachel Springall, finance expert at Moneyfacts.
“This is a window of opportunity for savers, so now is the time to clamber in and grab a decent rate before it closes,” says Mark Hicks, head of active savings at Hargreaves Lansdown.
He adds: “If you don’t need access to your money for a period, now is the time to consider a fixed rate account. You can lock in a rate of as much as 5%, which is only going to look more attractive when rates eventually fall.”
Although rates are expected to fall later this year, it’s not all bad news for savers. Consumer Duty rules could also have an impact on the savings market – but to the benefit of customers.
The regulator has introduced new rules about closed products, which come into force on 31 July. As part of this, providers will be required to ensure that closed products offer fair value.
“In the months ahead, it will be interesting to see if any savings providers pull closed savings accounts or move customers onto different products,” says Springall.
She points to a recent survey from Moneyhub, where 36% of respondents felt Consumer Duty rules would drive banks to become more customer-centric institutions.
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Katie has a background in investment writing and is interested in everything to do with personal finance, politics, and investing. She enjoys translating complex topics into easy-to-understand stories to help people make the most of their money.
Katie believes investing shouldn’t be complicated, and that demystifying it can help normal people improve their lives.
Before joining the MoneyWeek team, Katie worked as an investment writer at Invesco, a global asset management firm. She joined the company as a graduate in 2019. While there, she wrote about the global economy, bond markets, alternative investments and UK equities.
Katie loves writing and studied English at the University of Cambridge. Outside of work, she enjoys going to the theatre, reading novels, travelling and trying new restaurants with friends.
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