The City regulator has said savers are an estimated £4bn better off following improvements to easy access rates in recent months, but still put pressure on banks to offer more value.
The Financial Conduct Authority (FCA) said the average interest paid on easy access savings accounts increased to 2.11 per cent in June 2024, up from 1.66 per cent in July 2023, just before it published a review.
It said: “We estimate savers are £4bn a year better off from higher interest rates as a result.”
Still, the regulator said it had “found room for improvement” in how banks assess the value offered by their savings products.
“We expect firms to improve these assessments, having considered our feedback, and will take appropriate action where this is not the case,” it added.
A new consumer duty was introduced by the regulator last year, requiring financial firms to put consumers at the heart of what they do, including when designing products and communicating with customers.
Last July, the FCA also set out a 14-point action plan to ensure banks and building societies are passing on interest rate rises to savers appropriately, that they are communicating with customers more effectively and offering them better savings rate deals.
The FCA said last July that while interest rates on savings accounts had been rising, this had been happening more slowly for easy access accounts.
Since then, it has worked with the nine biggest firms on how they provide fair value to easy access savings customers.
The regulator said its latest analysis indicates that while banks were benefiting as the Bank of England base rate increased, the benefits were increasingly passed to savers.
It has seen improvements in both the rates available to savers and the volume and timing of firms’ communications to savings customers.
There were 174 instant access/no notice accounts that offered over four per cent interest in August, while the biggest firms continued to pay below average for easy access products, the FCA said.
It added that switching is straightforward, and 89 per cent of Isa switches happen within seven days.
Some people may find they can get higher rates for locking their money away for a fixed time period although people may also want to have some savings that they can easily access in an emergency.
As the base rate has started to fall, this has affected the interest rates offered, the FCA said, adding that it will continue to closely monitor firms’ future savings rate changes.
The regulator said on its website: “The base rate fell in August 2024 and market expectations anticipate further reductions over the coming year.
“We recognise firms must balance their lending and savings pricing in line with their business model.”
Additional reporting by Press Association
