People saving with building societies earned £775 million in additional interest on their savings last year than if they had earned the average interest rates paid by large Monetary Financial Institutions, a group mainly comprising the big banks.
The BSA collated interest rate data from building societies on the same basis as the Bank of England does for its Effective Interest Rates series.
The average rate offered by building societies in 2017 on so-called time deposits (including fixed rate, notice accounts and Cash ISAs) was 1.23%, compared to 0.90% at Monetary Financial Institutions.
On sight deposit accounts, where savings can be withdrawn on demand without penalty, the average rate was 0.70% at building societies, compared to 0.37% at Monetary Financial Institutions.
These rates are on all savings accounts, including ones closed to new deposits. They therefore demonstrate building societies’ commitment to loyal savers in the ongoing low interest rate environment.
If building societies had offered rates in line with the average effective rates at the Monetary Financial Institutions, these savers would have missed out on £775 million of interest.
The figures back up what price comparison service Savingschampion found earlier this year, when they said,
“On the whole, building societies are showing greater support for savers than banks. Building societies overall pay higher interest rates and demonstrate a greater commitment than banks to treating savers fairly.” Tom Adams, Savingschampion.
Comparisons in this article are made between the weighted average of interest rates across the BSA’s sample of building societies, and the Bank of England’s sample of Monetary Financial Institutions, which may include some building societies, that contribute to the Bank’s Effective Rate statistics.
The BSA collected data from eight of the largest societies which account for over 90% of the deposits held by the sector, replicating the methodology used for the Bank’s Effective Rates series.
The Bank’s effective interest rates return, Form ER, is reported monthly by a sample of 19 Monetary Financial Institutions (MFIs). Effective interest rate series are from Bank of England Bankstats Table G1.4, specifically the following codes:
CFMZ6IQ: Monthly average of UK resident banks' sterling weighted average interest rate - interest bearing sight deposits from Individuals and individual trusts
CFMZ6IW: Monthly average of UK resident banks' sterling weighted average interest rate - time deposits from Individuals and individual trusts
The Bank of England use the term Sight deposits which includes any account (except ISAs) where funds are available without penalty on demand, or by the close of business the day after the deposit was made.
The Bank of England uses the term Time deposits which includes any account in which the saver cannot obtain their funds without penalty on demand, or by the close of business the day after the deposit was made; so would include fixed rate and notice accounts and Cash ISAs.