Savers are missing out on up to £450 because they have stashed their cash in an account earning next to nothing, analysis has revealed.
Around £253billion of household savings has been left in zero-interest, easy-access accounts, when savers could be making much more.
This is the equivalent to £449 in lost interest on average for every household in the UK despite the central bank’s base rate being the highest its been in 15 years.
Last year, savings accounts were on a high with rates above six percent on some fixed-rate accounts. But this couldn’t last forever, as the economic climate changed.
Inflation currently sits at four percent and the Bank of England continued to freeze the base rate at 5.25 percent.
These factors have impacted savings rates, with the average monthly rate for savings accounts dropping to 4.1 percent in January compared to 4.6 percent in September, 2023.
Savers are urged to act now to secure the best rate possible to ensure their money is working as hard as possible for them.
Commenting on the Bank of England data, Jeremy Cox, the head of strategy at Coventry Building Society, warned that billions of pounds are being “abandoned” in low-interest rate accounts.
He said: “Many will also have savings languishing in low paying accounts, meaning that households are missing out on not just hundreds, but potentially thousands of pounds worth of saving interest.
“Savings interest rates of around five percent are still readily available following a run of 14 consecutive Bank of England base rate increases during the past two years.
“The start of a new year brings an opportunity for people to take action and get their finances into better shape. Spending a little bit of time to shop around and move money to higher rate paying accounts will make a sizable difference to people’s savings pots.”
Coventry Building Society reported than an additional £12.7billion worth of interest would go to households if this money was moved from a zero paying rate and put into an account earning five percent.
Lucinda O’Brien Money.co.uk savings accounts expert has explained how switching current accounts could unlock an impressive interest rate on one’s savings.
The key points she mentioned are that:
- Nationwide, First Direct and TSB are all offering savings accounts with an interest rate at six percent or above.
- TSB is currently offering a switching offer of up to £185
- Nationwide has gone one step further, as it is offering its current account members a Flex Regular Saver with an interest rate of eight percent
She said: “Looking at the savings account market for all customers, the top interest rate for an easy access account stands at 5.22 percent with Metro Bank’s instant access savings account. Whereas for fixed-rate accounts, Investec has a one-year fixed-rate saver at 5.30 percent.
“These rates are definitely still competitive and will help savers to earn some extra money on their cash. However, if you are keen to find the top rates, then you might need to look closer to home at the bigger banks.”
