Savings mistake is costing Britons £6.9billion with cash left ‘earning no interest at all’

An estimated minimum of £6.9billion in savings interest was “missed” by bank customers throughout last year.

Britons are being urged to switch to a high interest savings account as soon as possible while interest rates remain competitive.

Recently, Yorkshire Building Society warned that nearly £400billion has been left languishing in current accounts.

Data from the Bank of England reports that £235billion was held in non-interest paying current accounts last year on average.

If the average non-ISA instant access interest rate worth 2.95 per cent was applied, bank customers could have earned an extra £6.9billion in interest if they had transferred current account deposits to an access savings product.

Furthermore, this return would have been raised to £10.9billion if the money was placed in a one-year fixed-rate bond with the average rate of 4.65 per cent.

The amount of cash held in non-interest paying current accounts jumped during the pandemic from £163billion in January 2020 to £230billion in October 2023, peaking at £249billion last year.

Even with this amount being kept in current accounts, savers did take advantage of improved savings interest rates in 2023.

Figures from CACI revealed the amount of cash held in adult fixed-term ISA and non-ISA product rose from £161billion in October 2022 to £319billion the same month a year later.

However, balances in adult instant access ISA and non-ISA accounts dropped from £805billion to £730billion over the same amount of time.

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In the last year-and-a-half, savers have benefited from the Bank of England’s decision to hike the country’s base rate to 5.25 per cent.

With inflation easing and the central bank halting its rate increases, analysts are warning that the era of high interest rates could soon be over.

Banks and building societies, including Nationwide, have already begun reducing rates across its line of savings accounts.

Derek Sprawling, Paragon Bank Savings Director, described the trend of bank customers missing out on high savings interest rates as “disappointing”.

He said: “Whilst I appreciate that people like to keep some flex in their current account for everyday spending, the fact that balances have increased by approximately £70 billion since the start of the pandemic shows that many people are simply leaving large amounts of money in their current account earning them no interest.”