Savers told to vote with their feet for best deals
THE big banks continue to let down savers by offering inferior rates on their savings accounts.
Hard-pressed savers have been urged to consider building societies instead, as new research shows they typically offer a better deal.
Next month it will be exactly eight years since the Bank of England slashed the base rate to 0.5 per cent, in a cruel blow for those who had diligently set money aside for their future.
The Bank piled on further misery last August by slashing interest rates to a new low of just 0.25 per cent.
This makes it hard for savers to get a real return as consumer price inflation is now at 1.8 per cent and is expected to rise much higher. Last year the average return across all types of building society account was 1.09 per cent. While that is grim by historic standards, it is still over a third higher than the average bank paid at 0.81 per cent.
Independent savings advice service SavingsChampion.co.uk also found that eight out of 10 building society accounts pay more than the base rate, compared to fewer than six out of 10 banks. Director Sue Hannums said building societies have consistently come out on top for the last six years: “They offer greater value to longsuffering savers than banks.”
The Treasury and Bank of England made life even harder for savers with the Funding for Lending Scheme in 2012, which meant banks no longer needed to attract money from savers to fund their loans, and so do not need to offer top rates. Since then the average variable rate offered by banks has halved, after falling faster than building society rates. Hannums said: “Building societies are demonstrating a greater commitment to treating customers fairly. Savers need to vote with their feet to get a better deal.” The new breed of challenger banks are bucking the trend, with Virgin Money, Post Office Money, TSB and Tesco Bank competing to offer market leading savings rates.
Building societies such as Leeds, Coventry and Skipton also appear regularly in the best-buy tables, while the big banks rarely feature at all (see latest best buys on page 30).
Yesterday Renault-owned challenger RCI Bank announced it has received more than £2.1billion of deposits from more than 60,000 savers since launching in June 2015.
The big banks are still struggling to overcome the financial crisis, with HSBC posting disappointing results yesterday as write-downs hit the bank’s earnings.
The other big FTSE 100-listed banks also report this week, with Laith Khalaf, senior analyst at Hargreaves Lansdown, warning RBS is on course to report its ninth consecutive year of losses: “The light at the end of the tunnel is still obscured by US litigation and restructuring costs.
“However, Lloyds looks in decent shape, while Barclays seems to be heading in the right direction.”