Many of the largest banks in the UK appear to be low-balling the interest rates offered on their easy-access savings accounts – with them also significantly lower than in other European countries; even though the UK has a higher base rate.
In response to this, the personal finance comparison site, Finder, has joined forces with Plum, the smart money app, to compare how easy-access savings interest rates (or the closest equivalent) from large banks around the world compared with the local base rate.
The average interest rate offered by five of the UK’s biggest banks is just 1.6 per cent, which is under a third (31 per cent) of the current base rate, as set by the Bank of England, which was held at 5.25 per cent on 2 November 2023.
Finder and Plum analysed easy access savings rates (or the local equivalent) in 10 countries around the world, finding that the UK’s average interest rates are the fourth lowest when compared to the local base rate.
The country that topped the list was Norway, where the average interest rate available is 2.82 per cent – which is 66 per cent of the country’s 4.25 per cent base rate. Sweden came in second place with an average interest rate of 2.6 per cent. Sweden’s base rate is four per cent, making the average interest rate 65 per cent of the base rate.
New Zealand, which has a comparatively high base rate of 5.5 per cent, takes third place. The average interest rate from 5 of its largest banks is 2.95 per cent, which is 54 per cent of the base rate.
Jon Ostler, UK and US CEO of Finder, said: “There has been a growing number of organisations and politicians calling for the UK’s top banks to pass on higher interest rates to customers and this research will only add to this clamour.
“Even if the UK was towards the top of the global comparison table it wouldn’t be acceptable. However, our banks are offering significantly lower interest rates vs the base rate than all but one of the European countries we looked at.
“As a consumer, there are a few things you can do to combat low interest. There are savings and investment platforms that offer much better savings rates on products that are regulated by the FCA. You can also take advantage of a range of generous switching offers from the big banks, which can help make up for the lower interest you will earn.”
Victor Trokoudes, founder and CEO of Plum, also added: “While the UK’s big banks have been quick to increase interest rates on loans and mortgages, they have been far slower in boosting interest rates on savings accounts, effectively devaluing people’s hard-earned savings.
“The cost-of-living crisis shows little sign of abating, making it all the more disappointing that not only are many banks not sharing more of the base rate with customers, but they appear to be sharing less than their European counterparts.
“Borrowers are paying more while savers see minimal benefits, highlighting that the business models of the major banks are inherently misaligned with the interests of their customers. That’s why it’s so important that the public know that there are other options out there.”
What countries have lower interest rates than the UK?
Despite having the joint-highest base rate of 5.5 per cent, the USA came bottom of the interest rate comparison table. The average interest rate available from 5 of their largest banks is a miserly 0.12 per cent – just two per cent of the base rate.
Like France, Germany uses the ECB’s interest rate of four per cent, yet only offers an average interest rate of 0.89 per cent, which is almost five times lower (22 per cent) than the base rate and the second worst in the study.
Canada also emerged as worse than the UK. Here, the average interest rate available is 1.1 per cent, despite the base rate being almost five times higher at five per cent (making the average rate 23 per cent of the base rate).