Savers not switching despite better rates on offer
Two thirds of UK consumers have not taken their money out of low-paying savings accounts despite most (62 per cent) knowing there are better rates available, new research has found.
SmartSave, run by digital bank Chetwood Financial, commissioned an independent survey of 2,000 UK adults.
Among those who have not switched to another bank or savings provider, 46 per cent said they were reluctant because they have held their savings with the same provider for five years or more.
Read more: New era for alternatives as investors flock to fixed income
30 per cent say they do not have time to research alternatives, while 15 per cent do not know how to do so.
30 per cent said they are waiting to see if interest rates increase further before potentially moving their savings.
“UK inflation hit a 41-year high almost a year ago,” said Andy Mielczarek, founder and chief executive of SmartSave.
“During this time, Britons’ savings have been diminishing in real-term value. Rising interest rates – and the eventual decline of inflation – have promised to reset the balance somewhat, giving consumers the chance to achieve far better returns on their savings. However, it has become clear that loyalty to banks that are failing to pass on higher interest rates is hurting many savers.
Read more: Investors favour low-risk strategies amid economic uncertainty
“While customer loyalty has been stretched in recent years, our research highlights that there is still a preference for the perceived ease of staying put. However, it’s important that consumers understand that looking beyond the traditional high street banks – and to fixed-term products, if it is an option for them to set savings aside for a longer period – can provide an opportunity to benefit from higher interest rates than they may currently be receiving.”
The research comes as the latest data from Money.co.uk today showed that the best interest rate for a one-year fixed-rate cash ISA is offered by Virgin Money, paying 5.75 per cent.
Ford Money is offering 6.05 per cent interest on bonds with an 18-month and two-year fixed term.
In a high-interest-rate environment, P2P lending platforms have been hiking their rates to compete with savings accounts. easyMoney last month unveiled its latest rate hikes, bringing investor returns to between 5.28 per cent and 10 per cent.
Loanpad has been raising investor rates almost every month for the past year, with its investors now earning between 5.5 and 6.3 per cent.
Folk2Folk has raised its target returns from 6.5 per cent to 8.75 per cent, while CrowdProperty increased its target returns to between eight and nine per cent in May, before hiking them again to 10.5 per cent in July.
