More than two-thirds of people (69%) haven’t switched savings accounts while interest rates have skyrocketed, according to one financial expert.
A survey by savings account comparison website Money.co.uk found that many Brits are still missing out on earning some extra cash.
Financial expert Lucinda O’Brien from Money.co.uk said: “If you do one thing today – check what interest you are earning on your savings.”
She said interest rates have increased dramatically in recent years, but there are still many people that haven’t switched savings accounts yet.
O’Brien said Money.co.uk had carried out a survey to find out people’s savings habits in the UK, it spoke to just over 2,000 people last summer.
“We found 69% of consumers haven’t switched savings accounts in the past two years at a time when interest paid has gone up.
“Of those people who haven’t switched, 51% said the reason for not doing so was they were satisfied with their account and 27% said they preferred to keep all their accounts with the same bank.
She pointed out that a saver who had not check their account’s interest rate since June 2022 would be missing out on £233 extra cash.
O’Brien explained that the base rate stood at just 1.25% and the monthly average for all savings accounts was 2.73%, while instant access account were paying interest of 1.37%.
The expert added: “Let’s say you have £10,000 in an instant access account and you don’t make any further deposits or withdrawals and the interest rate remains the same. After a year, you would earn £137 if the interest rate was 1.37% (before tax).
“But, now let’s fast forward to June 2024 because the interest rates tell a different story.
“At the most recent Bank of England meeting, the monetary policy committee decided to keep the base rate at 5.25% – 2.52 percentage points greater than June 2022.
“So now savings accounts are paying around 4.1% and the monthly average for an instant access account is 3.6%.
“So, let’s take the same situation again – you have £10,000 in an instant access account (no withdrawals or deposits), but you’ve switched savings accounts to one that offers 3.6%.
“After a year, the interest earned would be £360.00 – £223 more than if they left their money sitting in a low interest account.”
Of the 31% of people who have switched savings accounts in the past two years, 66% told Money.co.uk the primary reason for doing so was higher interest rates. Just over a fifth (22%) said it was because there were better account features like linked accounts and easy transfers.
O’Brien said: “When comparing savings accounts, it’s important to look at all the terms and conditions before taking the plunge, as each account does come with different features. The interest rate should just be the starting point for your decision.
“Plus, the example above is only looking at the average interest rate, and the top interest rates in the market are actually a lot higher.”
The expert gave the example of two instant access savings accounts paying some of the top rates:
– Oxbury has an easy access account at 5.02%
– Mizrahi Tefahot Bank Ltd via Raisin has a one-year fixed-rate account at 5.25%.
This matches the base rate and it can be opened with £1,000.
O’Brien added: “If you check the interest rate on your bank accounts and discover that it’s more like June 2022 than June 2024 – then it’s worth doing some research to find a better deal.”
