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Savers £450 million better off with building societies in first half of 2019

People saving with building societies earned over £450 million more in interest than if they’d received the average interest rate paid by the major banks across the first half of 2019.

Cumulatively since the start of 2016, building society savers have received £2.7 billion in additional interest, relative to the average effective interest rate paid by large Monetary Financial Institutions, a group mainly comprising the big banks.

Longstanding customers

In its review of retail banking last year, the FCA found that a major factor behind the continued dominance of the big banks was customer inertia which meant the banks did not have to pay very attractive rates of interest on instant access savings. The average rate on these accounts according to the FCA was 0.28% at big banks, compared to 0.93% on similar accounts at building societies.

The FCA continues to investigate price discrimination in the cash savings market, with a particular focus on the low rates offered to savers who opened accounts a long time ago.

The BSA’s figures cover all outstanding balances, so will include longstanding customers. Looking just at instant access accounts - where the FCA has focussed its attention - in the last three and a half years savers at building societies have benefitted by £1.4 billion in extra interest than if they had received the average rate paid by the banks on these accounts.

Effective interest rates


Sight deposits

Time deposits


BoE effective rates

Building societies

BoE effective rates

Building societies

Period average


















2019 H1






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 the first six months of 2019 on so-called time deposits (including fixed rate, notice accounts and Cash ISAs) was 1.31%, compared to 0.97% at Monetary Financial Institutions (MFIs).

On sight deposit accounts, where savings can be withdrawn on demand without penalty, the average rate was 0.92% at building societies, compared to 0.50% at Monetary Financial Institutions (within which, current accounts had an average effective rate of 0.43% in the first half of 2019). By way of comparison, the official Bank Rate was unchanged at 0.75% throughout the first half of the year.



Comparisons in this article are made between the weighted average of interest rates across the BSA’s sample of large 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 assumed the average effective rates in June 2019 were unchanged from May 2019 to calculate these figures, as the June data is not yet available.

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 Monetary Financial Institutions (MFIs). Effective interest rate series are from Bank of England Bankstats Table G1.4, specifically the following series codes:

CFMZ6IQ: Monthly average of UK resident banks' sterling weighted average interest rate - interest bearing sight deposits from Individuals and individual trusts. (Of which current accounts are CFMZ6IU)
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 above figures are for interest bearing sight deposits.

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.

The FCA analysis referred to above can be found here, and the discussion paper is here.

Posted by Andrew Gall on 22 November 2019