Signs of a more competitive savings market are emerging, City regulator finds
Signs of a more competitive cash savings market have been emerging, with rates increasing and savers moving their money into higher-paying fixed-term deals, according to the City regulator.
The Financial Conduct Authority (FCA) said it has continued to see savers moving deposits out of easy-access accounts and into higher-paying fixed-term and notice accounts.
It wants firms to keep prompting customers in lower-paying accounts to move, and is encouraging savers to shop around.
From July to October this year, deposits held in fixed-term and notice accounts increased by £17 billion.
Over the same period, deposits held in bank and building society non-interest-bearing accounts and easy-access accounts reduced by £11 billion.
The average rate paid on easy-access deposits in October was 1.99%, the FCA said, up from 1.66% in July.
The average rate for fixed-term (which guarantee a rate for a specified period with restricted withdrawals) and notice accounts (which have a specified notice period for restricted withdrawals with a guaranteed rate) was 2.94% in July, rising to 3.52% in October.
The FCA’s website said: “There are rates much higher than this available, including many accounts that currently pay 5% or higher (for both easy-access and fixed-term deposits). As of December 4 2023, there were 311 instant/no-notice accounts available paying over 3%, 173 over 4% and 37 over 5%.
“The base rate has risen by 0.25 percentage points since July, meaning firms have, on average, increased rates by more than the value of the August base rate rise across all types of account.
“This positively suggests some greater responsiveness from firms to the most recent base rate rise and greater competition in the market, although we recognise that some of this increase may be a delayed response from previous rises.”
The regulator will continue to monitor firms’ approaches to providing fair value for on-sale and off-sale savings products.
Looking at the next steps, the FCA’s website said: “Where customers want to switch to better-value products, it is important they are able to do so easily and quickly. We have seen improvements in the Big Nine (Lloyds Banking Group, HSBC, NatWest Group, Santander UK, Barclays, Nationwide Building Society, TSB Bank, Virgin Money UK, and the Co-operative Bank) cash Isa transfer performance since publishing our review in July.
“We have been challenging firms across the market that are not consistently meeting the voluntary industry agreement of completing a minimum of 85% of cash Isa to cash Isa transfer requests within seven working days.”
The update follows a 14-point action plan the FCA set out in July.
The regulator said that, while there has been progress, it expects to see continued improvement from some firms.
Sheldon Mills, the FCA’s executive director of consumers and competition, said: “There is a more competitive savings market now than July – including many easy-access accounts paying above 5%.
“But there are still low-paying accounts out there, particularly products that are no longer on sale. We want firms to keep prompting customers in lower-paying accounts to move, and we encourage customers to shop around for the best savings deals.
“We will continue to closely monitor the savings market in 2024 to ensure that customers receive fair value.”