Not all accounts are competitive, however. Some of the biggest high street banks have been accused of short-changing savers by offering rates of less than 1% AER despite multiple base rate rises.
With products elsewhere topping 4% AER, now could be the perfect time to switch accounts if you're receiving a poor rate.
Here, Which? takes a closer look at the savings market to find the top rates, and how the big high street banks match up to them.
What are the current top rates for savings?
This table shows the top rates for restriction-free fixed-term and instant-access cash Isas and savings accounts, ordered by term.
As you can see, top rates for all fixed terms are over 4% AER, and the majority of the accounts are from smaller providers and Islamic banks.
The only high street provider to feature is Barclays, with a one-year cash Isa product. It's also the only provider to offer a top rate with a minimum deposit of just £1; savers will need significantly more to access the other top rates in the table.
Find out more:Is it time to ditch the big banks?
Savers looking for a generous return on their money from one of the UK's biggest high street banks will be disappointed.
Barclays may have a fixed-term cash Isa in the top rates table, but if you open an instant-access account you'll get just 0.55% AER interest. HSBC’s Flexible Saver account is the best of the bunch, but still that only offers 0.9%. These are both well below the average instant-access rate, which was 1.74% AER on 1 February, according to data from Moneyfacts.
The base rate is important, because it dictates the interest banks have to pay to borrow from the BoE – as it rises, they tend to look to savers' deposits for a cheaper way to fund their borrowing. Moneyfacts data, however, shows the majority of the biggest high street banks have failed to pass on every base rate rise on easy access accounts. In fact, Barclays and Santander have passed on just 0.54% since December 2021.
Savers looking to place their money in an account with rates that work harder for them would be wise to look beyond the high street.
Find out more:Why are some savings rates still so low?
While the base rate is often linked to the rates that bank offer on borrowing and savings, banks are under no obligation to pass on the rate rises or falls, unless a link to the base rate is specified in a product's terms.
Instead, it just describes how expensive it is for banks to borrow from the Bank of England, and it's common for banks' product rates to follow suit.
Part of the problem is savers’ hesitance to switch providers. According to Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, if enough loyal customers voted with their feet and left the high street giants, they would be forced to compete more for business and pass on base rate rises.
In the meantime, she says, high street banks are sitting on piles of savings that were deposited during the pandemic, so they're in no rush to raise rates to attract more cash.
Virgin Money’s Everyday Saver instant-access account, for instance, pays just 0.25% AER. But if all its savers choose to stick with it, there's little incentive for the provider to pay more. But if those savers chose to move to the top rate restriction-free equivalent product from Shawbrook Bank, which pays 3.06%, then a product paying 0.25% would no longer be viable.
Find out more:Will savings rates fall soon?
The consecutive Bank of England base rate rises, coupled with competition from savings providers, has led to average variable rates hitting their highest levels in more than 14 years.
However, this trend may not last much longer. Economists expect the base rate to keep rising until the summer, peaking at 4.5% before starting to fall. When it starts to come down, we're likely to see savings rates fall with it.
This calmer outlook is already being priced into fixed-term bond rates, so we're unlikely to see rates for these accounts rising a great deal more.
Variable-rate products, such as instant-access accounts, tend to be more popular, and therefore tend to be more reactive to base rate rises. Whether this trend will continue after the base rate steadies will depend on demand from savers.
Moneyfacts finance expert Rachel Springall says that if instant-access products remain popular, providers may be more inclined to continue raising rates in a bid to secure the top-rate spot.
source https://www.which.co.uk/news/article/can-switching-accounts-get-you-better-interest-rates-acvlU0B0Fvyp