Rachel Springall, Finance Expert at Moneyfacts, said:
“It will be disheartening news for savers to find the biggest banks have cut rates on their most flexible savings accounts, resulting in a further drop in their market positions. In contrast, the banks prove they can offer competitive returns of interest on accounts that lock away cash for a guaranteed return, such as on fixed rate bonds. Savers who prefer to have their cash at hand will unsurprisingly feel disgruntled that the situation has only worsened; as the Bank of England made base rate cuts, the big banks were soon to follow. As challenger banks work hard to improve their market positions and gain trust, the biggest banks don’t need to make too much effort to pull in investors due to their legacy.
“Loyalty does not pay which is why savers need to look beyond the biggest brands when comparing savings rates. The big banks’ most flexible accounts* pay an average rate of 1.42% gross between them, which is significantly lower than the market average rate of 2.90% gross, based on a £10,000 deposit. Regularly reviewing and switching pots is essential when interest rates change, particularly when base rate cuts flow into the savings market.
“The Consumer Duty rules from the Financial Conduct Authority (FCA) are designed to provide better value for consumers, and it will be up to providers to ensure they are offering their customers fair value. Savers must complain if they are receiving a poor service and look elsewhere if they have run out of patience. There are a multitude of brands covered by the Financial Services Compensation Scheme (FSCS), so it’s wise for savers to take some time to navigate the different options out there which could offer better value.”
*Big bank easy access selection: Barclays Bank, Everyday Saver, 1.50%. HSBC, Flexible Saver, 1.74%. Lloyds Bank, Easy Saver, 1.15%. NatWest, Flexible Saver, 1.49%. Santander, Easy Access Saver, 1.20%.
Fixed bond data extracts from using the Moneyfacts Consumer Duty Tool for Savings for one- and two-year bonds (Data correct as of 20 January 2025):
- Barclays Bank – The one-year fixed bond pays 3.90% and takes a place in the first quartile in its sector, available to new and existing customers.
- HSBC - Fixed Rate Savings pay gross rates of 4.05% for a one-year bond and 3.80% for a two-year bond which are available to new and existing HSBC current or savings account holders. These bonds both sit in the first quartile.
- Lloyds Bank - New customers are eligible for interest of 3.95% on a one-year bond and 3.65% for two years. These bonds both sit in the first quartile. Customers who have held a current account for at least 40 days will benefit from an additional 0.05% on a one-year bond and 0.10% on a two-year bond. The one-year bond at 4.00% and the two-year bond at 3.75% sit in the first quartile.
- NatWest - New customers are eligible for interest of 3.93% on a one-year bond and 3.74% for two years. These bonds both sit in the first quartile.
- Santander – New customers are eligible for interest of 4.10% on a one-year bond and 3.90% for two years. These bonds both sit in the first quartile.
Rachel Springall, Finance Expert at Moneyfacts, said:
“It will be disheartening news for savers to find the biggest banks have cut rates on their most flexible savings accounts, resulting in a further drop in their market positions. In contrast, the banks prove they can offer competitive returns of interest on accounts that lock away cash for a guaranteed return, such as on fixed rate bonds. Savers who prefer to have their cash at hand will unsurprisingly feel disgruntled that the situation has only worsened; as the Bank of England made base rate cuts, the big banks were soon to follow. As challenger banks work hard to improve their market positions and gain trust, the biggest banks don’t need to make too much effort to pull in investors due to their legacy.
“Loyalty does not pay which is why savers need to look beyond the biggest brands when comparing savings rates. The big banks’ most flexible accounts* pay an average rate of 1.42% gross between them, which is significantly lower than the market average rate of 2.90% gross, based on a £10,000 deposit. Regularly reviewing and switching pots is essential when interest rates change, particularly when base rate cuts flow into the savings market.
“The Consumer Duty rules from the Financial Conduct Authority (FCA) are designed to provide better value for consumers, and it will be up to providers to ensure they are offering their customers fair value. Savers must complain if they are receiving a poor service and look elsewhere if they have run out of patience. There are a multitude of brands covered by the Financial Services Compensation Scheme (FSCS), so it’s wise for savers to take some time to navigate the different options out there which could offer better value.”
*Big bank easy access selection: Barclays Bank, Everyday Saver, 1.50%. HSBC, Flexible Saver, 1.74%. Lloyds Bank, Easy Saver, 1.15%. NatWest, Flexible Saver, 1.49%. Santander, Easy Access Saver, 1.20%.
Fixed bond data extracts from using the Moneyfacts Consumer Duty Tool for Savings for one- and two-year bonds (Data correct as of 20 January 2025):
- Barclays Bank – The one-year fixed bond pays 3.90% and takes a place in the first quartile in its sector, available to new and existing customers.
- HSBC - Fixed Rate Savings pay gross rates of 4.05% for a one-year bond and 3.80% for a two-year bond which are available to new and existing HSBC current or savings account holders. These bonds both sit in the first quartile.
- Lloyds Bank - New customers are eligible for interest of 3.95% on a one-year bond and 3.65% for two years. These bonds both sit in the first quartile. Customers who have held a current account for at least 40 days will benefit from an additional 0.05% on a one-year bond and 0.10% on a two-year bond. The one-year bond at 4.00% and the two-year bond at 3.75% sit in the first quartile.
- NatWest - New customers are eligible for interest of 3.93% on a one-year bond and 3.74% for two years. These bonds both sit in the first quartile.
- Santander – New customers are eligible for interest of 4.10% on a one-year bond and 3.90% for two years. These bonds both sit in the first quartile.
