Originally published by Savings Champion. Read the full press release here.
Updated research from Savings Champion has shown that, on average, building societies continue to pay better rates to their customers than banks. Although there are exceptions to the rule.
Whilst it's almost a year since the Bank of England base rate rose to its highest level since February 2009, the rate of 0.75% is still far lower than the level of return that savers would expect their savings accounts to beat.
With this minimum expectation in mind, more than two-thirds of building society accounts (68%) pay a higher rate than the base rate, compared to less than half of accounts from banks (49%) - a significant difference between the two groups.
And while you would expect many of these low rates to be found amongst providers' older accounts that are closed to new business - it is not solely the case.
Over the last six years, the average rate for an on-sale variable account from a bank has dropped by more than double the average for on-sale building society accounts - a 21.5% drop, as opposed to just 9%.
Off-sale accounts have still suffered badly with both groups – but once again banks have cut their off-sale accounts by more – a drop of 34% over the last six years compared to 31%.
Looking more closely at the last 12 months, the overall average variable interest rate paid by building societies was 1.05%, compared to 0.83% from the banks - 26.5% higher - showing a clear gap between the two groups.
When it comes to the average rates, there is a clear disparity between the two groups and it demonstrates that building societies on the whole pay higher rates and are therefore treating savers more fairly than banks.
Of course, there are plenty of examples of providers within both groups that buck the overall trend, so savers should certainly still be looking at the best possible options on the market before taking action.
The most obvious example of this are the challenger banks, which are clearly an exception to the rule, as many of these providers are actively competing in the savings market and in many cases dominating the best buy tables.
The same cannot be said of the big high street banks, which are dragging the average rates down by paying some of the worst rates on the market. We know that significant sums are still held with the high street banks and these figures should be another wake-up call for savers to switch to a better deal.
For example, savers with funds languishing in the HSBC Flexible Saver are currently earning just 0.15% or £75 on a balance of £50,000. If that cash was moved to the best buy easy access accounts from Cynergy Bank paying 1.50%*, they could be earning 10 times more interest, £750 gross per year.
There are competitive rates to be found, so savers must not accept paltry returns, instead switch to a better-paying alternative without delay. If your provider does not reward your loyalty, then don't stand for it.