Loyal Savers Miss Out on Hundreds of Pounds Amid Low Interest Rates

Strategic Insights -

Consumers using the UK's top high street banks will miss out on more than £300 this year if they stick with their current savings options, according to a recent audit by the consumer group Which?. The auditor found that customers of banks like Barclays and Lloyds Bank were receiving as low as 0.1% in returns on their savings, despite the Bank of England having raised interest rates to 4.5%. This disparity highlights the struggle faced by loyal savers, who are missing out on significant sums of money due to low interest rates.

Key Takeaways:

  • Customers of Barclays and Lloyds Bank received the lowest returns over the past three years, earning an average of 0.1% between January 2020 and March 2023.
  • The Bank of England's interest rate was cut from 0.75% to 0.1% in 2020, remaining at a record low until December 2021, when it began climbing.
  • Challenger banks Saga and Gatehouse paid the highest returns on easy access savings, averaging 1.49% and 1.25% respectively.
  • The average two-year fixed mortgage rate has jumped from 2.34% to 5.35% since interest rates began rising, while banks have struggled to pass on these increases to savers.
  • The Financial Conduct Authority (FCA) has challenged some of the worst offending banks to increase returns fairly compared with the increases in mortgage rates.
  • The FCA's consumer duty aims to clamp down on firms offering unjustifiable savings rates, with Which? calling for the regulator to take action.

Statistics:

  • Customers of Barclays and Lloyds Bank received an average return of 0.1% on their savings over the past three years.
  • The Bank of England's interest rate was 4.5% as of the last available data.
  • Challenger banks Saga and Gatehouse paid an average of 1.49% and 1.25% respectively on easy access savings.
  • The average two-year fixed mortgage rate has increased from 2.34% to 5.35% since interest rates began rising.

Sources:

  • Which? report on savings rates (no date available)
  • UK Financial Conduct Authority (FCA) press release (no date available)
  • The Bank of England's Monetary Policy Committee (MPC) minutes (vol. 27, no. 95)