Banks are making a killing off savers with billions in bank accounts, which pay nothing.
Santander has increased its net interest margin — the difference between what it pays savers and charges borrowers — by a fifth over the past year, from 1.59 per cent to 1.91 per cent.
After reducing the interest rate for its popular 123 account by 1.5 percent at the beginning of 2020, it is now only 0.3 percent.
Banks are pushing inexpensive mortgage deals that can be hiked with just a month’s notice in a ‘cynical ploy’ to cash in on imminent interest rate rises, brokers warn
The margin at Lloyds Banking Group (which includes Halifax) has risen by 5.4% over the first nine month of this year. It’s now 2.55 per cent, up from 2.42 per cent a year ago.
Savers with the big banks hold some £866 billion in easy-access accounts, which pay as little as 0.01 per cent.
This is an increase of £179 billion since the start of the pandemic. They keep a further £250 billion in current accounts which pay no interest — a rise of £59 billion.
There are no cash accounts available that will protect you from rising living costs, with inflation expected to rise to as high as 5% by spring 2022.
If the Bank of England raises rates, signing up to even the cheapest tracker rather than the best fixed-rate deal would cost a homeowner with a £250,000 loan an extra £1,783 over two years
Barclays and HSBC are some of the banks that offer easy-access accounts. They pay 0.01 percent interest.
This works out at a paltry £1 in interest a year on each £10,000 — not even enough to buy a cup of coffee.
Yet other providers now pay as much as 0.67 per cent or £67 a year.
This gap will only widen as interest rates rise quickly, which is what we expect.
Shawbrook Bank’s online account offers the best rate, and requires you to deposit at least £1,000.
Anna Bowes, from Savings Champion, says: ‘Big banks are renowned for not passing on any base rate rise in full.
Even if they were to, you would still lose out because they pay such low rates.’
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, says: ‘If you are lucky enough to have been building up savings during the pandemic, you need to switch it from your current account to protect it.’
With inflation running at 5 per cent, £10,000 in savings will, after a year, give you the same buying power as £9,500 today — a loss of £500.
If you move this cash to a top easy-access account, one paying 0.67 per cent, you’ll reduce this loss to £433.
Tracker mortgages can be flexible: According to brokers, tracker mortgages offer flexibility for people who need to relocate quickly or change deals. They don’t charge any early repayment penalties.
Some savers might be anxious about moving their savings to lesser-known institutions.
Consumer champion Which? Nearly 4,500 Savers were asked to rate their service provider. They had to rank the ease of opening an account and customer service. Marcus by Goldman Sachs was rated among the top.
Marcus’s instant access account, which is available only online, pays 0.6 per cent for 12 months, after which the rate will drop to 0.5 per cent.
Coventry BS gives 0.3% to its new customers through the Easy Access Saver Account. This account is also available online, by phone, or post.
Coventry’s Limited Access Saver, at 0.5 per cent, is also competitive, as long as you do not make more than six withdrawals a year.
sy.morris@dailymail.co.uk
