Competitive savings rates from supermarkets are giving banks a run for their money as both Tesco and Sainsbury’s have increased their savings account interest rates, Moneyfacts.co.uk has revealed.

The personal finance information provider has found that Tesco and Sainsbury’s are keeping up with other high street savings accounts. The Tesco savings account is one of the best performing with an interest rate of three per cent on its Internet Saver Account, while Sainsbury’s is offering 2.90 per cent interest on its internet savings account.

Although, according to Moneyfacts.co.uk, an Egg Savings Account is still the best internet savings account on the market, offering customers a rate of 3.25.

Commenting on the increased rates, Michelle Slade, spokesperson at Moneyfacts.co.uk said: “Many consumers are disillusioned with traditional banks and instead are looking for an alternative provider for their finances. The combination of competitive deals and a strong brand that consumers already know and trust is a real winner for the supermarkets.”

“Smaller providers are relying more heavily on their savings books to fund their lending activities and in turn are offering the most attractive savings rates.

“By comparison, many high street banks have a number of alternative ways of raising funding and tend to offer less attractive deals.”

Ms Slade added that the competition posed by Tesco to high street banks is only going to increase: “Tesco has already announced its intention to open branches and to move into offering mortgages and possibly current accounts. It will be looking to make its mark in these new areas and is likely to enter the market with highly competitive deals.”

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