A new study has found that 69 percent of consumers in the UK have not switched bank accounts in the last two years. Many Britons also make the mistake of forgetting to check the interest rate on their savings accounts and ISAs.
With interest rates having significantly increased over the last couple of years, this means Britons who are leaving their savings in an old account could be losing potential earnings.
The research conducted by money.co.uk, found that those who switch to a higher interest account could earn £223 more per year on £10,000.
Lucinda O’Brien, money.co.uk savings accounts expert said: “If you do one thing today – check what interest you are earning on your savings.
“Interest rates have increased dramatically in recent years, but there are still many people who haven’t switched savings accounts.
“We conducted a survey to find out people’s savings habits in the UK, and it revealed 69 percent of consumers haven’t switched savings accounts in the past two years. Of those people who haven’t switched, 51 percent said the reason for not doing so was they were satisfied with their account and 27 percent said they preferred to keep all their accounts with the same bank.
“However, this decision means that many people are likely earning a lot less interest than what is currently available in the market.”
In June 2022, the base rate stood at just 1.25 percent and the monthly average for all savings accounts was 2.73 percent. The monthly average for an instant access account was 1.37 percent.
“So, 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,” said Lucina. “After a year, you would earn £137 if the interest rate was 1.37 percent (before tax).”
However, fast-forward to June 2024 and 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 percent – 2.52 percentage points greater than June 2022.
“This increase is then evident in the average for all savings accounts as that currently stands at 4.1 percent and the monthly average for an instant access account is 3.6 percent.
“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 percent. After a year, the interest earned would be £360.00 – £223 more than if they left their money sitting in a low-interest account.
“This means it really does pay to move your money. For the 31 percent of people who have switched savings accounts in the past two years, 66 percent said the primary reason for doing so was higher interest rates. 22 percent said it was because there were better account features like linked accounts and easy transfers.
“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.”
Of course, choosing the right savings account will depend on a number of personal factors, including how much money you want to save and whether you prefer a fixed or easy access account.
According to Lucinda, the key way to understand if it’s time to consider a switch is simple. She said: “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.”
