Consumer watchdog Which? has criticised high street banks for their low savings rates compared to challenger banks.

The organisation analysed six types of accounts over the past three years, finding that instant access savings accounts from Lloyds Bank and Barclays paid an average of 0.1 per cent.

In contrast, challenger banks paid an average rate of 0.57 per cent over the three-year period while building societies paid an average of 0.42 per cent.

FStech has reached out to Barclays and Lloyds for comment.

Which? said that consumers are reluctant to switch savings accounts, citing research from Hargreaves Lansdown which found a third of people think interest rates are too low to bother switching banks. A further seven per cent of people said they think High Street banks are safer.

The watchdog claims consumers could earn around £312 more per year on a £10,000 deposit by using an instant access account offered by Chip compared to Barclays’ Everyday Saver account.

The findings come as the Treasury Select Committee wrote to High Street banks to ask them what proportion of their interest rate rises are passed on to their savings customers.

The Financial Conduct Authority has also asked High Street banks to justify their lower savings rates and has threatened to take action if banks cannot justify passing on higher interest rates.

Commenting on the news Jenny Ross, editor of Which? Money, said that customers should switch if they are unsatisfied with the rates they are receiving.

“With millions of consumers still feeling the impact of an unrelenting cost of living crisis, it’s become even more important to get better returns on savings accounts,” she said. “Yet, our research shows that established High Street banks are short changing customers by potentially hundreds of pounds a year.”

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