Savers switch accounts at record levels in search of higher interest rates

British savers opened a record number of savings accounts late last year as they switched banks to seek higher rates, a new analysis shows.

A total of £73.5 billion was deposited into new savings accounts in the last three months of 2022, according to analysis of Caci data by Paragon Bank.

It represented an increase of 317 per cent compared to the £17.6bn recorded over the same period in 2021 and was almost as much as the total posted in the full year.

Caci collects data on savings deposits from 34 leading banks and building societies.

While the numbers don’t reflect the entire market, the survey does provide a snapshot of how much more attractive savings rates have become.

It also shows that savers are finally voting with their feet and actively moving their money to a new provider to get a better return.

Earlier this month, the Bank of England raised key interest rates to 4 percent, the highest level in more than 14 years. Just over a year ago, the base interest rate was still 0.1 percent.

Savings rates followed in kind, with average interest rates also reaching their highest levels in more than a decade.

However, some providers – notably the big banks – have refrained from rewarding savers, creating huge gaps in the market.

Most major banks are still paying less than 1 percent on their standard easy-to-access deals.

This is Money analysis of the big banks’ results showed they made an extra £7 billion last year on net interest margins – the difference between the rates they pay to savers and those they charge to borrowers.

Meanwhile, challenger banks and building societies have led the way in catapulting the best-buy, easy-to-access savings rates.

Savers willing to vote with their feet can now secure more than 3 percent for easy access.

>> View the best low-threshold savings rates here

Top fixed rate savings deals also skyrocketed, with some deals reaching as high as 5 percent by the end of last year.

>> View the best fixed interest savings rates here

Since then, they have fallen as market expectations about future rate hikes faded.

However, recent weeks have seen signs of a resurgence following the launch of a slew of new top deals.

Caci’s figures show that the bulk of switchers involved savers moving their money into new, easily accessible savings accounts.

It showed that £33.9bn was deposited into new easy access accounts in the last three months of last year, and £22.4bn into new term accounts.

A further £4bn was poured into new Isa direct access deals, with £12.7bn in fixed term Isa accounts.

According to Paragon, the transfer of cash to current accounts could drive change.

Current account balances rose during the pandemic as people stored excess cash.

Caci’s data shows £313 billion in current accounts in January 2020, rising to a peak of £460 billion in September 2022.

That trend then began to reverse and current account balances ended the year at £447 billion.

Derek Sprawling, head of savings at Paragon Bank, said: “The number of new account openings was phenomenal in the fourth quarter of last year as savers woke up to the benefits of putting their money in accounts with rates that work harder for them.

“Our analysis shows that a significant amount of cash has moved into checking accounts over this period, so we would expect this money to have moved into savings accounts with better rates.

“While we have early indications that the trend will continue into 2023, there are still hundreds of billions in deposits receiving interest below 1 percent.”