Savers are missing out on billions of pounds worth of savings interest that could significantly boost household budgets, according to new research.
paragon bank has warned households that around £235bn of cash is stuck in current accounts, “earning no interest at all” due to mistakes made by too many people.
Over the course of last year, bank customers ‘missed out’ on savings interest by an estimated minimum of £6.9bn.
Brits are being urged to switch to high-interest savings accounts as soon as possible while interest rates remain competitive.
Brits are missing out on billions of pounds in savings interest
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recently, Yorkshire Building Society has warned that nearly £400bn is sitting in current accounts..
According to Bank of England data, an average of £235bn was held in non-interest bearing current accounts last year.
If an average non-ISA Instant Access interest rate equivalent to 2.95% applied, bank customers could have earned £6.9bn in extra interest if they moved their current accounts into Access Savings products.
Furthermore, this return would have increased to £10.9 billion if the funds had been invested in one-year fixed rate bonds with an average interest rate of 4.65%.
The amount of cash held in non-interest bearing current accounts has soared during the pandemic from £163bn in January 2020 to £230bn in October 2023, from a peak of £249bn last year.
Even though this amount was kept in a current account, savers took advantage of improved savings interest rates in 2023.
CACI figures show the amount of cash held in adult fixed-term ISAs and non-ISA products rose from £161bn in October 2022 to £319bn in the same month next year.
However, balances in adult Instant Access ISA and non-ISA accounts fell from £805bn to £730bn over the same period.
Over the past year and a half, savers have benefited from the Bank of England’s decision to raise the benchmark interest rate to 5.25%.
With inflation easing and central banks pausing interest rate hikes, analysts are warning that the era of high interest rates could soon be over.
banks and building finance associations, Including the whole countryhas already started lowering interest rates across its savings accounts.
Paragon Bank Savings Director Derek Sproulling said the trend of bank customers missing out on higher savings rates was “disappointing”.
He said: ‘While we appreciate that people want to have some extra room in their current accounts for day-to-day spending, the fact that balances have increased by around £70bn since the start of the pandemic means that many “It shows that people are simply leaving a lot of money behind.” Their checking accounts earn no interest. ”