Individuals who have remained loyal to a single bank for an extended period of time are being encouraged to explore other options to ensure they are receiving the best possible deal.
Many economists are forecasting that interest rates will continue to rise and reach seven percent by the end of this year.
Alexandra Loydon, director of Partner Engagement and Consultancy at St. James’s Place, advised Express.co.uk: “Take the time to explore what’s available and compare rates offered by other institutions. It’s worth considering switching or engaging with your current bank to ensure you have the best account available.
“Also, make sure you understand the difference between current and savings accounts; savings accounts should offer a higher interest rate than your current account.”
However, she cautioned that switching bank accounts can be challenging, and banks rely on this to retain their customers.
She explained: “If you are not particularly proficient in using the internet and operating online, it becomes almost impossible.
“Banks take advantage of this; people don’t leave because it’s difficult and many can’t be bothered, so there’s no incentive for banks to increase rates.”
She warned that millions of savers have their money in low-paying accounts with rates of two percent or less, even though some fixed rate savers offer six percent or more.
An individual with £10,000 in savings earning two percent could potentially miss out on £400 in interest per year.
Rajan Lakhani, resident money expert at smart money app Plum, mentioned that there are some very attractive deals available for savers willing to move away from traditional well-known providers.
He said: “Don’t expect your high street bank to offer an interest rate anywhere close to the base rate on your savings.
“While the FCA has been encouraging them to increase rates, the increases have been slow and minimal, with most banks still offering rates below two percent for easy access accounts. In contrast, fintech companies and smaller banks have been able to quickly offer higher rates to savers.”
Plum is currently offering up to 4.21 percent AER with its Easy Access Interest Pocket, and even its Basic interest account offers a rate of 3.51 percent.
However, Mr. Lakhani warned that savers often struggle to find the motivation to invest time in searching for a better deal.
He said: “Inertia is a significant issue, which the high street banks take advantage of by offering low rates, knowing that most people won’t switch.
“It can be helpful to do the calculations and see how much extra you could save elsewhere to begin with.
“You can also approach switching methodically, perhaps once a year or every six months, especially when the base rate frequently changes.”
He also addressed concerns about having to switch again if providers increase their rates after another base interest rate hike.
The expert stated: “It’s important to remember that your savings won’t grow significantly if they remain in your current account. Waiting for the highest rate isn’t a wise strategy, as it’s impossible to predict when that will be.”
Ms. Loydon discussed some factors to consider when evaluating different savings options.
She said: “Savings accounts may have different access terms, so you need to think about when you might need your money and how long you can save it for.
“Some individuals may prefer a physical branch presence and may be averse to conducting all transactions online, although this is becoming increasingly difficult.
“Others might require access to different currencies and overseas account facilities. Lending may also need to be considered.
“For instance, if you are looking for a mortgage, you might want an offset account, in which you use a savings account to offset what you owe.”
For the latest personal finance news, follow us on Twitter at @ExpressMoney_.
