Savings warning: Britons urged to take action as major banks slash interest rates - 'Loyalty does not pay!'

Savers urged to be careful of tax on savings interest
GB NEWS
Patrick O'Donnell

By Patrick O'Donnell


Published: 26/01/2025

- 08:30

Analysis from Moneyfactscompare is breaking down the state of the savings market in the UK

Major high street banks have seen their easy access savings rates slip further down market rankings, with several institutions dropping from middling positions to the bottom tier.

Analysis from Moneyfactscompare reveals that Barclays, NatWest, and Santander have all fallen from the third quartile to the bottom quartile for their flexible savings interest rates with experts highlighting that "loyalty does not pay".


These banking giants now join Lloyds Bank in offering some of the least competitive easy access rates in the market, according to the money comparison website. HSBC maintains its position in the third quartile.

The deterioration in flexible savings rates comes as a blow to customers who prefer immediate access to their funds, with none of the major banks achieving positions in the top two quartiles of the market.

In stark contrast to their easy access offerings, the same major banks maintain highly competitive positions for fixed-rate savings products. Barclays, HSBC, Lloyds Bank, NatWest and Santander all currently offer fixed bonds that sit in the top quartile of the market.

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Woman looking worried and interest rate cut

Savers are being warned that "loyalty does not pay" at major banks

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Here is a full list of the easy-access savings accounts available to new customers from the UK's major high street banks, as compiled by Moneyfactscompare.

  • Barclays Bank Everyday Saver - 1.50 per cent interest rate
  • HSBC Flexible Saver - 1.74 per cent interest rate
  • Lloyds Bank Easy Saver - 1.15 per cent interest rate
  • NatWest Flexible Saver - 1.49 per cent interest rate
  • Santander Easy Access Saver - 1.20 per cent interest rate.

This disparity between fixed and flexible savings rates highlights a clear strategy from the high street banks. While they appear willing to offer attractive rates to customers prepared to lock away their money, those seeking immediate access to their savings face significantly less favourable terms.

The Moneyfacts Consumer Duty Audit Tool for Savings confirms this pattern, showing that despite strong performance in fixed-rate products, these institutions have failed to improve their positions in the flexible savings market.

Rachel Springall, a 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."

She noted that as the Bank of England implemented base rate cuts, the major banks were quick to follow suit. The expert pointed to the established banks' market dominance as a key factor in their approach to rates.

"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," Springall explained.

The gap between major banks' rates and market averages remains stark, with data revealing a significant disparity.

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Bank of England and interest rate graph with the Bank of England behind it The Bank of England's MPC will meet next month to discuss interest rates GETTY

The largest banks' most flexible accounts offer an average rate of just 1.42 per cent gross on a £10,000 deposit. This falls considerably short of the market average rate of 2.90 per cent gross, highlighting the potential cost of customer loyalty.

"Loyalty does not pay which is why savers need to look beyond the biggest brands when comparing savings rates," Springall advised.

She emphasised the importance of active account management in the current climate.

"Regularly reviewing and switching pots is essential when interest rates change, particularly when base rate cuts flow into the savings market," the savings expert added.

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