FRESH pressure was placed on big UK banks today over the paltry savings deals they offer despite a jump in interest rates in the last year.
MPs and others have complained that the big banks do not pass on hikes in interest rates to savers, despite moving quickly to do so for mortgage costs.
Rates have gone up 14 times in a row since December 2021 as the Bank of England tried to get inflation down to its target of 2%.
October inflation rates were 4.7% down from 6.3% in September.
Figures today from personal finance comparison site finder.com and money app Plum reveal that the interest rates offered on easy access savings accounts by some of the largest banks in the UK are significantly lower than in many other countries when compared to the local base rate.
The research shows:
1) The UK’s biggest banks offer rates that are just 31% of the base rate (1.6% vs 5.25%)
2) All but one European country in the study offer better rates vs the base rate than the UK
3) Only Germany, Canada and the US are behind the UK in the study of 10 countries
The interest rates offered on easy access savings accounts by some of the largest banks in the UK are significantly lower than in other European countries, despite the UK having a higher base rate.
The average interest rate offered by five of the UK’s biggest banks is just 1.6%. This is under a third (31%) of the current base rate, as set by the Bank of England, which was held at 5.25% on Thursday 2nd November.
The City expects that with inflation now seemingly under control, Bank base rates are likely to fall from here, certainly from next year.
The country that topped the list was Norway, where the average interest rate available is 2.82% - two-thirds (66%) of the country’s 4.25% base rate.
Another Scandinavian country, Sweden, came in second place with an average interest rate of 2.6%. Their base rate is 4%, making the average interest rate 65% of the base rate.
New Zealand, which has a comparatively high base rate of 5.5%, takes third place. The average interest rate from 5 of its largest banks is 2.95%, which is 54% of the base rate.
Finder.com’s UK & US CEO, Jon Ostler, said: “There has been a growing number of organisations and politicians calling for the UK’s top banks to pass on higher interest rates to customers and this research will only add to this clamour. Even if the UK was towards the top of the global comparison table it wouldn’t be acceptable, however our banks are offering significantly lower interest rates vs the base rate than all but one of the European countries we looked at.
“As a consumer, there are a few things you can do to combat low interest. There are savings and investment platforms that offer much better savings rates on products that are regulated by the FCA. You can also take advantage of a range of generous switching offers from the big banks, which can help make up for the lower interest you will earn.”
Plum’s CEO and Founder, Victor Trokoudes, said: “While the UK’s big banks have been quick to increase interest rates on loans and mortgages, they have been far slower in boosting interest rates on savings accounts, effectively devaluing people’s hard-earned savings. The cost-of-living crisis shows little sign of abating, making it all the more disappointing that not only are many banks not sharing more of the base rate with customers, but they appear to be sharing less than their European counterparts.”
