A stark divide is emerging in the UK savings market, leaving loyal customers with some of the biggest high street banks significantly worse off. While the best easy-access accounts now offer returns above 5%, the average rate has plummeted to a mere 0.93%.
This growing gap means savers who don't shop around for the best deals are missing out on hundreds of pounds in potential interest each year. The situation has prompted concerns that banks are failing to adequately reward their customers' loyalty.
The Loyalty Penalty: High Street Banks vs. Best Buys
Analysis by financial data firm Moneyfacts reveals a shocking disparity. The most competitive easy-access accounts are now paying over 5% in interest. In stark contrast, the average rate across all such accounts has fallen for the first time in over a year, dropping from 1.05% to 0.93%.
This creates a 'loyalty penalty' where customers who leave their money sitting in old accounts with major banks are earning a fraction of what they could. For example, a saver with £10,000 could earn over £500 annually with a top-tier account, compared to just £93 at the average rate—a difference of more than £400.
A Market of Two Tiers
Rachel Springall, a finance expert at Moneyfacts, commented on the trend: "We are seeing a two-tier market develop. Savvy shoppers are securing inflation-beating returns, while others are seeing their savings eroded by inflation in poor-paying accounts."
This trend isn't limited to easy-access accounts. Notice accounts and Cash ISAs have also seen their average rates stagnate or fall, even as the best deals in these categories continue to offer attractive returns.
Pressure on Lenders and Regulatory Scrutiny
The Financial Conduct Authority (FCA) has recently implemented its new Consumer Duty, which requires firms to prove they are providing fair value to customers. The growing savings gap is likely to intensify scrutiny on whether banks are passing on interest rate rises fairly to their savers.
With the Bank of England's base rate holding at a 15-year high, the pressure is on for lenders to justify why their easy-access returns remain so low for such a large portion of their customer base. For UK savers, the message is clear: to get a good return, loyalty does not pay.
