The gap between the highest savings rates from High Street banks and returns from smaller rivals is widening.
You can now earn 3.26 per cent in the most accessible accounts and this rate could rise even higher after the Bank of England raised its base rate last week.
But at High Street banks you can only earn 0.25 percent. Someone with a £10,000 piggy bank in the worst paying account would miss out on £295 in interest in one year.
The Bank of England raised its base rate by 0.25 percentage point to 4.25 percent last week. It is the highest rate in more than 14 years and the 11th increase since it began climbing from its historic low of 0.1 percent in December 2021.
The returns that savers can get are miles away from the punishing 10.4 percent annual increase in the cost of living, but savers should get the highest rates to best protect their nest eggs.
Top Deals: You can earn 3.2% on the best easy access accounts and this rate could rise higher after the Bank of England raised base rates last week. But High Street banks only pay 0.25%
The average easily accessible deal has increased from 0.25 percent a year ago to 1.85 percent now, according to Moneyfactscompare.
But that’s more than double the best rate some big banks offer. Their accounts are popular with savers who have more than £800 billion in their account and earn between 0.25 per cent at worst and 1.2 per cent at best.
The big banks have passed on only a fraction of the base rate hikes to struggling savers.
The big four – Barclays, HSBC, Lloyds (including Halifax and the Bank of Scotland) and NatWest (including RBS) – were dragged before the Treasury Select Committee last month and criticized for their behaviour. But until those changes, savers should look elsewhere for better rates.
Rachel Springall, of interest rate monitor Moneyfactscompare, says: ‘Not every savings provider is passing on a base rate hike, so it’s critical for savers to keep up with the changing market.
Newer banks and building societies offer the best returns, while most large banks pay less than 1 percent.’
Lloyds, which has some £120bn in easily accessible group-wide accounts, pays just 0.65 per cent on balances of up to £25,000 in its Easy Saver and Standard Saver.
In Halifax Everyday Saver and Instant Saver, along with Bank of Scotland Access Saver, you earn 0.7 per cent on amounts up to £10,000 and 0.8 per cent between £10,000 and £50,000.
NatWest, which has around £92.5bn in easily accessible accounts, raised the rate it pays on amounts between £1 and £25,000 in its Flexible Saver and Instant Saver to 1 per cent last week, following its appearance before the government agency. RBS Flexible Saver pays the same rates.
Barclays and HSBC declined to say how much they hold in easily accessible accounts, citing the information as commercially sensitive.
Barclays pays 0.55 percent on its easily accessible Everyday Saver account, while HSBC, the best of the bunch, raised its rate to 1.2 percent on its Flexible Saver earlier this month.
Rates at other major banks include Virgin Money at 0.25 percent on its Everyday Saver, TSB Easy Saver at 0.6 percent and Santander at 0.7 percent on its Everyday Saver.
All have remained quiet after last week’s base rate hike, while new banks and some building societies quickly announced improved rates for savers.
Atom raised its Instant Saver rate to 3.2 percent, more than double the highest paying account at the major banks, and a whisker behind the 3.21 percent paid by Zopa.
Charter Savings Bank Easy Access raised its rate to 3.18 percent. Yesterday, Shawbrook went up to 3.26 percent, while Family BS launched an online saver, also up 3.26 percent.
Yorkshire BS has announced that rates will rise by 0.25 percentage point from next Wednesday.
The Rainy Day Savings account goes up to 3.6 per cent on the first £5,000 in your account. On anything above that, your rate is 3.1 percent. But you can only withdraw money from the account two days a year.
The Internet Saver Plus Issue 13 pays 3 per cent on £1, while the branch and mail based Access Saver Plus Issue 7 goes up to 2.8 per cent. Both accounts allow you to deposit or withdraw money whenever you want.
Coventry’s BS rates will increase by up to 0.15 percentage point from 4 April. The online Easy Access account pays 2.7 percent and the branch-based Easy Access Saver pays 2.4 percent.
Your money is protected by all banks and building societies listed by Money Mail up to £85,000, or £170,000 in joint accounts, through the Financial Services Compensation Scheme.
sy.morris@dailymail.co.uk
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