£253bn worth of savings is languishing in accounts - are you missing out on thousands?
A massive £253billion is still sitting in bank and building society accounts paying no interest, Bank of England data shows
A massive £253billion is still sitting in bank and building society accounts paying no interest, Bank of England data shows.
Although the amount has gone down from the October 2022 peak of £272billion, savers are being warned their money is languishing.
Following 14 consecutive hikes to the base rate, being it being held at a 15-year high of 5.25 per cent, savers are urged to take advantage of improved interest rates on savings.
The base rate has been sitting at 5.25 per cent since September 2023, whilst the most recent CPI inflation figure came in at 3.2 per cent.
The last time interest rates were this high, just £33billion was held in non-interest-bearing accounts, according to Laith Khalaf, head of investment analysis at AJ Bell.
He said: "Given the dramatic rise in interest rates over the last few years, one might have expected this cash mountain to crumble, but remarkably £253billion still sits in accounts paying zero interest to households.
Moneyfactscompare figures showed that four in five savings accounts now beat the rate of inflation
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"This is money which is simply wasting away once the effect of inflation is taken into account. It would hold as much value stuffed into a mattress, if you could find one that would hold a quarter of a trillion quid.
"The last time interest rates were at 5.25 per cent, in April 2008, there was £33billion held by households in accounts paying no interest.
"Even accounting for the increased stock of household savings over that period, that still looks like a phenomenal explosion in this type of account.
"To give some context, between 2008 and 2024 the amount held in instant access accounts paying some interest has increased from £510billion to £911billion, so nowhere near the same level of growth."
The high interest is good news for savers as last month, Moneyfactscompare figures showed that four in five savings accounts now beat the rate of inflation.
There were around 1,364 savings accounts which beat the rate of CPI inflation which was up from 953 in February.
This includes 162 easy-access accounts, 143 notice accounts, 163 variable rate ISAs, 281 fixed-rate ISAs and 615 fixed-rate bonds.
Khalaf continued: "The average rate on cash held in instant access accounts is currently 2.1 per cent. This is below the rate of inflation, and compares very unfavourably to top savings accounts on the market, which are paying in excess of five per cent.
"Savers can wait for banks and building societies to improve their average rates, or take action themselves."
The top easy access cash ISA - offered by Plum - currently pays 5.17 per cent, Moneyfactscompare said. Even if one doesn't need the tax benefits of an ISA, they may decide to opt for an ISA in order to get higher rates.
Alternatively, Paragon Bank pays 5.05 per cent on its easy access account, although there is a £1,000 minimum deposit. The account allows two withdrawals before the rate drops to 1.5 per cent.
Another option is Oxbury which pays 5.02 per cent and allows unlimited withdrawals. However, savers will need a staggering £20,000 or more to open the account.
For those willing to lock money away for a bit loner, Zenith Bank UK pays the top six-month fixed rate of 5.18 per cent with a minimum £1,000 deposit.
This can be opened online and interest is paid at maturity.
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Britons can also boost their rates with £50 cashback by opening an account via online 'savings marketplace' Raisin.
Alternatively, if someone is looking for a shorter fix, the online 'savings marketplace' Flagstone currently offers 5.22 per cent for a three-month fix.
Khalaf offered five pointers for savers to avoid accounts paying next to nothing in interest.
- Keep as little as possible in current accounts
- Shop around for the best rate
- Don't forget Cash ISAs
- Consider gilts
- Think about investing.
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