UK Banks Offer Meager Rates Despite Base Interest Rate Hike

The study found that some instant access savings accounts are offering rates as low as 0.1%, which is significantly lower than the Bank of England's key interest rate of 4.5% set in May.

This is the highest level for the central bank's base rate since 2008 during the global financial crisis.

Which?

editor Jenny Ross said that the low interest rates offered by high street banks are "unjustifiable" and that consumers may be better off switching banks to get the best rates.

UK Finance, a banking lobby group, has defended the rates, saying that there are multiple factors that contribute to the interest rate offered on savings accounts.

However, the introduction of a new FCA "consumer duty" on 31 July may lead to a clampdown on banks that do not offer fair rates to consumers.

First Direct is launching a one-year fixed-rate savings account with a rate of 4.60% AER (annual equivalent rate) on 30 May, which is only available to First Direct customers with a First Direct current account.

The bank is also offering £175 to switch to its current account.

Shawbrook launched a one-year fixed-rate bond and one-year fixed-rate Isa last week, offering rates of 5.06% AER and 4.43% AER, respectively.

A UK Finance spokesperson advised consumers to consider whether they needed instant access to their cash or could deposit funds for a long time when shopping for deals.

"While the interest rate on an instant access account may be lower, they offer customers the flexibility to access their money when they need it," the spokesperson said.

"We would always encourage customers to shop around for the product and interest rate that is suited to their needs."