Martin Lewis issues urgent warning over bank accounts to ‘ditch and switch’ NOW or risk losing cash
MARTIN Lewis has told savers to leave their bank to secure a higher interest rate or risk losing potentially hundreds of pounds.
Speaking on Radio 4 this morning Martin said the banks are "profiteering" by putting up mortgage rates more than savings rates.
Last week the Bank of England raised the base rate of interest by half a percentage point to 5%.
It was the thirteenth rise since December 2021 when the rate was 0.1%.
But while banks usually pass on higher interest rates to customers by making it more expensive to borrow, they're often slower to do the same on savings.
Inflation pain
With inflation still stubbornly high, savings take a double hit.
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In May inflation was 8.7% and a year before, the average savings rate was just 0.8%.
That means £1,000 deposited in May last year would have earned £8.03 in interest.
Inflation over the same time means you'd need £1,078.95 to buy the same things this year as you did with £1,000 last year.
In real terms, you lose £70.92 just by leaving the money in the bank.
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The consumer champion and founder of Money Saving Expert said: "The main banks are keeping people in apathetic old accounts where they're not putting rates up because people don't move.
"There are some decent savings rates out there but still not the level of inflation.
"You have to ditch and switch to get them."
Where to find the best savings rates
The best easy access savings account is from Principality paying a rate of 4.15%, though you can only make two withdrawals a year.
If you save £50 a month into this account you would earn £11.55 interest.
If you can lock into a one-year fixed rate, Oaknorth Bank is paying 5.72%, earning you £15.98.
Meanwhile some of the older savings accounts from Barclays, Lloyds Bank and Hodge Bank all pay just 0.1% - earning you 28p in interest over a year.
You can find the full list of banks that have raised their savings rates here.
Government urges "do the right thing"
Martin said the Chancellor had hinted to him that telling banks to pass on higher rates to savers is still "on his agenda".
"When I met him I pushed quite strongly for this," Martin said. "We need to look at savings rates.
"The fact that the banks, who we bailed out in 2007 when they were in trouble, are now profiteering by increasing their margins when we, the taxpayer, is in trouble seems a little bit beyond the pale for me."
A Downing Street official said banks should ensure savers benefit from higher interest rates.
He said: “It’s not only the right thing to do but it also has the potential to reduce inflation because people are encouraged to save rather than spend.”
But until they do Martin said savers must look at switching or risk losing money.
And if you've got a decent sized savings pot, you'll be missing out on hundreds of pounds.
If you leave £10,000 in an account paying 0.1% you'll earn £10 in a year.
But if you moved it to Principality's 4.15% account, you'd get £422.99 back at the end of the year.
He said the whole point of higher interest rates was to "bring down inflation and squeeze borrowers to take money out of the economy".
But he said that wasn't the only way to tackle the higher cost of living.
"Another much more palatable and less painful way to do that is increase savings rates so that people are encouraged to save more.
"Just because banks always do this isn't a reason for saying that's absolutely fine when we're in the middle of an economic crisis, with huge inflation and cost of living problems, that we allow the banks to massively increase their profits on the back of increasing margins."
He added: "My clarion call to anybody who's a saver right now is be an active and aggressive saver on rates and make sure you are ditching and switching.
"The biggest way we can kick banks in the pocket is to leave them."
You can save up to £85,000 per person, per financial institution and your money is guaranteed to be repaid to you if your bank goes bust.
How can I find the best savings rates?
Don't waste time looking at individual banking sites to compare rates.
They change all the time, with new best buys coming out every day.
At the moment it's worth checking comparison sites regularly - MoneyFacts, Confused, Compare the Market, Go Compare and MoneySupermarket search the market for you.
These sites let you tailor your searches to an account type that suits you.
Meanwhile, we revealed the full list of banks not hiking mortgage rates despite last week's jump.
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Do you have a money problem that needs sorting? Get in touch by emailing [email protected]