Only one in 10 instant access savings providers ‘passing on full base rate rise’

Just 10% of providers had increased their rates by the full 0.25 percentage points following the most recent base rate rise, Defaqto said.

Less than half of savings providers have increased their interest rates for instant access accounts since the Bank of England base rate increased in February, Defaqto said (Nick Ansell/PA) (PA Archive)

Less than half (42%) of savings providers have increased their interest rates for instant access accounts since the Bank of England base rate increased in February, analysis has revealed.

The findings indicate that the rising base rate does not necessarily mean better returns for savers.

Just 42 out of 99 providers looked at by Defaqto had raised rates since the Bank of England raised the base rate from 0.25% to 0.5% last month.

Defaqto, which analyses financial products and awards star ratings, found that only one in 10 (10%) of providers had increased their rates by the full 0.25 percentage points.

The next base rate decision will be announced on Thursday, with economists predicting it could be hiked to 0.75% amid surging inflation – which is also eroding the real value of people’s savings.

It is still worth having a look around at what is on offer to get the best rate you can for your cash

Katie Brain, Defaqto

Many of the top instant access deals on the market are being offered by “challenger” brands.

Looking at the top instant access deals, Defaqto highlighted a 0.80% rate from Cynergy Bank, a 0.77% rate from Tandem, a 0.75% deal from Atom Bank, a 0.70% rate from Marcus by Goldman Sachs and another 0.70% rate from Saga.

Katie Brain, consumer banking expert at Defaqto, said: “After years of historic low interest rates, the Bank of England has increased the base rate and this should be good news for savers.

“However, consumers are not seeing the full benefit of the increase at the moment, as providers are not passing the full increase on to them.

“On the whole, rates are still better than they have been for a while and that is good news, but it is still worth having a look around at what is on offer to get the best rate you can for your cash.”

Giving some general tips for how savers might be able to find better returns, Ms Brain said: “It’s worth shopping around and seeing if you are eligible for a better rate at your local building society.

“Think about whether you need to access the money instantly as rates can be better if you can tie up your money for a fixed period.

“It’s also vital to check whether the rate is fixed or variable as it could change after you’ve opened the account. You should also make a note of when the fixed interest rate period ends as you will usually be switched to the provider’s standard variable rate after this, which will be lower.”

She added: “While interest rates are still relatively low, they have increased from what they were just a few months ago. If you can put a bit of cash away each month, no matter how small, this can really add up over time.”