How you could benefit from switching savings accounts

Base rate hikes have resulted in some of the most generous interest rates in recent years, but many savers are missing out on better returns. The good news is, there are more opportunities than ever before to make money from your savings - you just need to know where to look. In this article, we discuss the current savings environment, and why switching savings accounts can pay off.

Between March 2020 and August 2023, the Bank of England increased the base rate from 0.10% to 5.25%, leading to higher interest rates on savings accounts. The Bank then held the rate at 5.25% seven consecutive times, before reducing it to 5% in August 2024.

And yet, a surprisingly large number of people have not taken advantage of these higher rates. As a result, nearly £300 billion of UK savings are sitting in accounts earning less than 2% interest. What’s more, huge sums are held in current accounts that typically offer no interest at all.

When you consider that inflation is currently at 2.2% (as of July 2024), the real value of these savings is shrinking. Even though some savers are earning interest, what they earn is often not enough to counteract the higher prices of goods and services.

It can be eye-opening to see just how much things have changed. In March 2020, with interest rates at rock bottom, anyone who wanted to make money on their savings had very few options. However, the savings landscape has since transformed. Although the base rate dipped slightly in August 2024, you can still find banks offering savings rates of around 5% AER.

Despite this dramatic turnaround, many savers have stuck with their low-interest accounts from that time. In fact, a recent report found that an astonishing 69% of people haven’t switched their savings accounts to benefit from these higher rates.

To put this into perspective, if you have £10,000 in an account earning 2.25% instead of 5.25%, you’re missing out on £300 in interest per year. This difference adds up over time, especially if your account has compound interest.

This example, using non-compounding rates, is purely illustrative and should not be viewed as indicative of the returns of any specific financial product or as financial advice. Please read individual product terms for the details of how interest is calculated and paid.

Against this background, you might be wondering how you can take advantage of these rates and get more from your savings. These days, savers in the UK are spoilt for choice. With over 2,000 different products available, today’s savings market is more dynamic than ever. And many of these accounts offer returns well above the national average, so you don’t need to settle for less. Try comparing savings accounts to see how much more you could be earning.

Kevin Mountford, Co-Founder of Raisin UK, noted that:

"Although we have seen the first Bank of England base rate reduction since 2020, there are still some very attractive savings rates available. However, it is important that savers act now. The competitive UK market means that providers need to inflate customer savings rates, in order to attract the deposits they need to fund their lending ambitions. Unfortunately, millions of UK savers still have money languishing in accounts paying less than 1%. Raisin UK is offering fixed products paying over 5%, so this means more money in your pocket, as opposed to the banks."

At Raisin UK, we offer a variety of savings options to cater to different needs. Whether you’re after unlimited withdrawals or guaranteed returns, there’s an account for everyone.

Easy access accounts currently offer interest rates comparable to some of the more restrictive account types. Plus, you have the confidence of knowing you can deposit and withdraw funds whenever you need.

If you are saving for a particular goal, notice accounts offer attractive interest rates - sometimes on a par with those of fixed rate bonds. You’ll also be able to access your funds after giving a notice period of one to three months.

For those who don’t need immediate access to their savings, fixed rate bonds can offer some of the highest returns available. By locking your funds away for a set period of time, you benefit from knowing exactly how much you’ll earn at the end of your chosen term.

Worried about the hassle of switching savings accounts? With Raisin UK, it couldn’t be easier. You could start by comparing accounts in our offers table and checking how much your savings might earn. Next, register for a free Raisin UK Account, choose the account that best suits your needs, and apply to open in just a few clicks.