More than £1tn languishing in low-interest savings accounts as Brits urged to shop around
More than £1tn of savings is languishing in low-interest accounts Bank of England data has shown as Britons are urged to shop around for the best deals.
The central bank’s base interest rate has stood at a post-financial crisis high of 5.25 per cent since last August, whereas its figures showed the average rate on an easy-access savings account was 2.02 per cent in December.
Around £1.15tn was sitting in accounts earning less than that average, according to analysis by investment platform Lightyear. This figure made up nearly two-thirds (66 per cent) of UK deposits.
Martin Sokk, the firm’s co-founder and chief executive, said: “Banks aren’t passing on the central bank rate and instead are taking the profit for themselves.”
Meanwhile, the average interest rate on fixed-term savings accounts was 3.71 per cent in December.
“The top reason for saving in the UK is for a rainy day – it’s clear that people want to easily access their money, but decent rates are only available when it’s locked away,” Sokk added.
A wide difference between lending and savings rates has generated significant profits for banks, with the sector’s loan margin, calculated as net interest income divided by total lending, reaching its highest level since 2006. The metric is used as a barometer for banks’ profitability.
The UK’s largest banks have been scrutinised by MPs and watchdogs for not passing on interest rate hikes to savers while they reap the benefits of wide net interest margins.
Lloyds, Barclays, HSBC and Natwest made bumper profits of £41bn in the first nine months of 2023, compared to £23bn in the same period the year before, according to employee union Unite.
They are expected to see a boost to annual profits when they report full-year results in the coming weeks.
A spokesperson for banking trade body UK Finance said: “Savings and borrowing rates aren’t directly linked and therefore move at different times and by different amounts. Savings rates increased significantly over the course of last year and there are a lot of good products available in a competitive market.”
They added: “Many of our members have been proactively contacting their customers to let them know about different savings accounts that are available. We always recommend people shop around for the product and interest rate that is suited to their needs.”