Savers switch accounts at record levels in search of higher interest rates

British savers opened a record number of savings accounts at the end of last year as they switched banks to seek out higher rates, new analysis has revealed.

A total of £73.5billion was placed into new savings accounts during the final three months of 2022, according to analysis of Caci data by Paragon Bank.

It represented a 317 per cent increase compared to the £17.6 billion recorded in the same period in 2021 and was nearly as much as the total placed during in the entirety of that year.

Caci figures show that the largest proportion of switching involved savers moving their cash into new easy-access savings accounts

Caci compiles savings deposits data from of 34 leading banks and building societies. 

Although the figures don’t represent the whole of the market, the research gives a snapshot into how much more attractive savings rates have become.

It also shows that savers are finally voting with their feet and actively moving their cash to a new provider to secure a better return.

Earlier this month the Bank of England upped the base rate to 4 per cent – the highest level in over 14 years. Little more than a year ago the base rate was at 0.1 per cent.

Savings rates have followed in kind with rates average rates also reaching the highest levels in more than a decade.

However, some providers – namely the big banks – have refrained from rewarding savers, meaning huge gaps have opened up in the market.

Most of the big banks continue to pay less than 1 per cent on their standard easy-access deals.

This is Money analysis of the major banks‘ results showed that they made an extra £7billion last year from net interest margins – the gap between the rates they pay savers and charge borrowers. 

Meanwhile, challenger banks and building societies have led the way in catapulting the best buy easy-access savings rates.

Savers prepared to vote with their feet and move can now secure more than 3 per cent on easy-access.

>> Check out the best easy-access savings rates here

The best fixed rates savings deals also rocketed upwards with some deals reaching as high as 5 per cent towards the end of last year.

>> Check out the best fixed rate savings rates here

They have since fallen back as market expectations about future interest rate rises dissipated.

However, in recent weeks there are signs of a resurgence after a swathe of new top deals were launched.

Caci’s figures show that the largest proportion of switching involved savers moving their cash into new easy-access savings accounts.

It showed that £33.9billion was put in new easy access accounts in the final three months of last year, with £22.4 billion placed in new fixed-term accounts.

A further £4 billion was put in new instant access cash Isa deals, with £12.7billion in fixed-term Isa accounts.

The transfer of cash held in current accounts could be driving the change, according to Paragon.

Current account balances surged during the pandemic as people stored excess money.

Caci’s data shows that in January 2020, £313billion was stored in current accounts, rising to a peak of £460 billion in September 2022.

That trend then started to reverse and current account balances ended the year at £447 billion.

Derek Sprawling, head of savings at Paragon Bank, said: ‘The rate of new account openings was phenomenal during the fourth quarter of last year as savers woke up to the benefits of placing their money into accounts with rates that work harder for them.

‘Our analysis shows that a significant amount of cash held within current accounts moved during this period, so we would expect that money to have been directed towards savings accounts offering better rates.

‘However, even though we have early indications of the trend continuing into 2023, there is still hundreds of billions in deposit balances receiving rates below 1 per cent.’

This post first appeared on Dailymail.co.uk