Banks quietly pay loyal savers less and let mortgages drift onto pricey rates. Here is how the loyalty penalty works, what Consumer Duty changed and how to fight back.
Look at the savings account you opened years ago. The one your bank once called a ‘reward’ account. Now check the rate. If you need your glasses to find it, you’re not alone.
British banks have long made good money out of customers who don’t move. They’re polite about it, they send you birthday emails, and they quietly pay you less than they pay strangers. The good news is that the rules have shifted in your favour. The better news is that fixing it usually takes an afternoon.
The model is simple. A bank launches a shiny account with a headline rate to pull in new money. Over time the rate gets trimmed, or the account is closed to new customers and left to wither. The people who stay put, often older savers with large balances, end up subsidising the deals offered to newcomers.
The Financial Conduct Authority looked hard at this in its Cash Savings Market Review, published in July 2023. It found that easy access accounts held around 60% of balances across nine of the largest firms, and that banks had been far quicker to raise what they charge borrowers than what they pay savers. Easy access is exactly where lazy money sits, and exactly where the gap tends to be widest.
Put some numbers on it. Say you have £50,000 in an old easy access account paying 1%. That earns £500 a year. If competitive accounts are paying around 4%, the same money would earn £2,000. That’s £1,500 a year for doing nothing more than staying where you are. Over five years, before any compounding, it’s £7,500 handed back to your bank for the privilege of being loyal.
For context, Bank of England Bank Rate stood at 3.75% through the autumn of 2026, with inflation above the 2% target. If your savings are paying well below inflation, your money is shrinking in real terms, whatever the statement says.
Partly. The FCA’s Consumer Duty came into force on 31 July 2023 for products still on sale, and on 31 July 2024 for closed products, the old accounts banks used to forget about. It requires firms to deliver good outcomes for retail customers, including products that offer fair value, communications people can actually understand, and support that doesn’t trap them.
In practice, that has pushed banks to tell savers more clearly when a better rate is available in-house, and the FCA has said it will challenge firms paying the lowest rates. What it does not do is set a minimum rate or force your bank to pay you the best deal on the market. Fair value is not the same as best value.
Consumer Duty makes banks play fairer. It doesn’t make them play for you.
So the Duty is a useful backstop and gives you something to point to if you complain. It is not a substitute for checking your own rates.
Savings are the obvious one, but the same habit shows up elsewhere.
Mortgages. When a fixed or tracker deal ends, you usually roll onto the lender’s standard variable rate, which is typically much higher. Lenders let you pick a new deal, known as a product transfer, from up to six months before your current one ends. Diarise it. Even a few months on the standard rate can cost hundreds of pounds on a sizeable loan.
Current accounts. Packaged accounts with a monthly fee are only worth it if you’d actually use, and qualify for, the bundled insurance. Plenty of people pay for travel cover that excludes their age or health, or breakdown cover that duplicates what came with the car. Check the terms, then do the sums.
Branch ‘advice’. If someone at your bank offers to review your savings or investments, ask them directly whether they can recommend products from across the market or only their own. Many can only offer their own range. That isn’t necessarily bad, but you should know it’s a shop window, not an independent opinion.
For current accounts, the Current Account Switch Service does the work. Your new bank moves your balance, direct debits and standing orders across in seven working days, and payments sent to your old account are redirected. If anything goes wrong, the guarantee means you get refunded any interest or charges caused by the switch. Banks sometimes offer cash to switch, which can be a nice bonus, but don’t let it be the only reason.
For savings, it’s even simpler: open the new account, move the money, close the old one. A few practical rules:
ISAs: never withdraw the cash yourself to move it. Ask the new provider to arrange an ISA transfer, or you could lose the tax-free wrapper. The overall ISA allowance is £20,000 for the 2026/27 tax year. From 6 April 2027, the amount under-65s can put into cash ISAs each year is set to fall to £12,000, while over-65s keep the full £20,000 for cash.
Protection: the Financial Services Compensation Scheme covers up to £120,000 per person, per authorised bank or building society, since 1 December 2025. Some brands share one banking licence, so check before spreading money between names that turn out to be the same bank.
Tax: outside an ISA, the Personal Savings Allowance lets basic-rate taxpayers earn £1,000 of interest a year tax-free and higher-rate taxpayers £500. Additional-rate taxpayers get nothing. Scotland has different income tax bands, so Scottish taxpayers should check which allowance applies. Chase a better rate and you may tip into tax you didn’t pay before, so it’s worth knowing where you stand.
If you think your bank has treated you unfairly, say on charges, a mis-sold product or the way it handled a closed account, complain to the bank first and in writing. It has eight weeks to give you a final response. If you’re not happy with that, or it runs out of time, you can take the case to the Financial Ombudsman Service. It’s free, and you don’t need a claims firm to do it for you.
For bigger decisions, such as what to do with a lump sum, pension cash or the proceeds of a house sale, MoneyHelper offers free guidance, and an FCA-regulated independent financial adviser can look at your whole picture. Just make sure you know how they’re paid before you start.
Banks often pay long-standing customers less than new ones, particularly on old easy access savings, and let mortgages lapse onto expensive standard rates. The FCA’s Consumer Duty, in force for closed products since July 2024, requires fair value but doesn’t guarantee you the best rate. Check your rates at least once a year, switch using the Current Account Switch Service or a proper ISA transfer, keep each bank holding within the £120,000 FSCS limit, and complain to the Financial Ombudsman if your bank won’t put things right.
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