The big banks stitching up savers – and where to switch!

The UK’s ‘Big five’ banks are once again in the spotlight for ripping savers off with miserly easy-access rates.

Interest offered by Lloyds, Barclays, NatWest, HSBC and Santander is significantly lower than in other countries – despite the UK having a higher base rate, new research reveals.

The average interest rate offered by the UK’s five biggest banks is currently just 1.6 per cent. This is less than a THIRD (31 per cent) of the base rate, which the Bank of England recently held at 5.25 per cent.

This is despite the Financial Conduct Authority hauling these banks over the coals in July for failing to pass on base rate hikes to savers.

The latest research by comparison site Finder.com and smart money app Plum looked at how easy-access savings rates (or the equivalent) from big banks in 10 countries around the world compare to the local base rate.

Norway topped the list with an average interest rate of 2.82 per cent – two third of the country’s 4.25 per cent base rate. Its Scandinavian neighbour Sweden came in second with an average interest rate of 2.6 per cent, 65 per cent of its four per cent base rate.

Which countries have lower interest rates than the UK?

Despite having the joint-highest base rate of 5.5 per cent, the USA came bottom of the interest rate comparison table. The average interest rate available from five of its largest banks is a measly 0.12 per cent – just two per cent of the base rate.

Like France, Germany uses the ECB’s interest rate of four per cent, yet only offers average interest rates of 0.89 per cent, which is almost five times lower (22 per cent) than the base rate and the second worst in the study.

Canada also comes out worse than the UK. Here, the average interest rate available is 1.1 per cent, despite the base rate being almost five times higher at five per cent (making the average rate 23 per cent of the base rate).

Jon Ostler, Finder.com’s UK & US CEO, said: “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.”

Where to switch – ethical banks offering the best easy-access savings rates

1. Tandem Bank

Easy Access – Five per cent/gross/AER  – with ‘top-up rate’ – you need to manually apply this, but it’s the click of a button.

There is no minimum deposit on this account paying five per cent. After a year of saving £1,000, you would earn you £50. £25,000 would earn £1,250 and £100,000 would make a healthy £5,000.

2. Leeds Building Society

Limited Issue Online Access Account – Five per cent/gross/AER/variable

Minimum deposit on this account is £1,000. If you kept your pot at £1,000, after a year you would have made £50 in interest. £25,000 would make £1,250 and £100,000 would earn you £5,000.

3. Yorkshire Building Society

Internet Saver Plus Issue 13 – 4.80 per cent/gross/AER/variable

Online access only, minimum deposit £1. Unlimited withdrawals allowed. Saving £1,000 over one year would reward you with £48, £25,000 would be £1,200 and £100,000 would earn you £4,800.

4. Raisin UK

Castle Community Bank Easy Access – 4.71 per cent/gross/AER/variable (up from 4.17 in July)

Castle Community Bank offers its Easy Access account through comparison site Raisin with an interest rate of 4.71 per cent. The minimum deposit is £1,000. You can top up your account with the minimum amount of £500 per transaction and the maximum balance you can have is £85,000.

If you kept your pot at £1,000 then you would make £47.10 in interest over the course of one year. For £25,000 it’s £1,177.50 and for £100,000 it’s £4710.

5. Skipton Building Society

Easy Access Saver – 3.80 per cent/gross/AER/variable (up from 3.60 per cent in July)

The minimum deposit on this account is just £1 and interest is 3.80 per cent – so on £1,000 over one year you’d make £38 in interest. On £25,000 you’d make £950 and £100,000 would get you £3800.

Find out more about what makes these providers ethical here.

You could also consider Plum Interest, which offers 5.14 per cent interest. This is an interest-earning fund that holds government-backed assets, which Plum says makes it low risk with stable returns. Although considered low risk, this is an investment product NOT savings and therefore your capital is at risk. To get the 5.14 per cent interest rate you must be a premium customer, paying £9.99 per month.

Remember if you don’t need your savings for at least five years, you should consider investing as you’re likely to attract higher returns in the long term. Unlike saving, when you invest your capital is at risk.