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Savers are an estimated £4 billion better off following improvements to easy access rates in recent months, according to the City regulator.
The Financial Conduct Authority (FCA) said the average interest paid on easy access savings accounts increased to 2.11% in June 2024, up from 1.66% in July 2023, just before it published a review.
It said: “We estimate savers are £4 billion a year better off from higher interest rates as a result.”
A new consumer duty was introduced by the regulator last year, requiring financial firms to put consumers at the heart of what they do, including when designing products and communicating with customers.
In July 2023, the FCA also set out a 14-point action plan to ensure banks and building societies are passing on interest rate rises to savers appropriately, that they are communicating with customers more effectively and offering them better savings rate deals.
The FCA said in July 2023 that while interest rates on savings accounts had been rising, this had been happening more slowly for easy access accounts.
Since then, it has worked with the nine biggest firms on how they provide fair value to easy access savings customers.
The regulator said its latest analysis indicates that while firms were benefiting as the Bank of England base rate increased, the benefits were increasingly passed to savers.
It has seen improvements in both the rates available to savers and the volume and timing of firms’ communications to savings customers.
The FCA said savers should still shop around to get the most from their money.
There were 174 instant access/no notice accounts that offered over 4% interest in August, while the biggest firms continued to pay below average for easy access products, the FCA said.
It added that switching is straightforward, and 89% of Isa switches happen within seven days.
Consumers should also consider if easy access accounts are best suited to their savings needs, it added.
Some people may find they can get higher rates for locking their money away for a fixed time period although people may also want to have some savings that they can easily access in an emergency.
Which? research shows the biggest banks still lag well behind some of their building society and challenger bank rivals, and those unsatisfied with their provider might want to consider switching— Sam Richardson, Which? Money
As the base rate has started to fall, this has affected the interest rates offered, the FCA said, adding that it will continue to closely monitor firms’ future savings rate changes.
The regulator said on its website: “The base rate fell in August 2024 and market expectations anticipate further reductions over the coming year.
“We recognise firms must balance their lending and savings pricing in line with their business model.”
Sam Richardson, deputy editor of Which? Money, said: “While it’s encouraging to see high street banks offering savers better rates, it should not have taken years of investigations by Which?, a campaign by MPs and action from the regulator to achieve such modest upward movement.
“Which? research shows the biggest banks still lag well behind some of their building society and challenger bank rivals, and those unsatisfied with their provider might want to consider switching.”
Charlene Young, a pensions and savings expert at AJ Bell, said: “As the Bank of England base rate comes down savers should be alert to falling rates of interest on cash, and be prepared to switch to find a better deal.
“While news that easy access rates improved slightly in response to pressure from the City regulator is welcome, it is still crucial to shop around to get the best deals.”
