New data shows that building societies give the UK’s hard pressed savers a better deal than other deposit takers do.
The Building Societies Association (BSA) has collated this new data using a similar methodology to the effective rates data compiled and published by the Bank of England[2, 3]. These cover all outstanding balances, so include existing accounts as well as new business. They therefore indicate the relative long-term value offered by different providers.
The data shows that savers with building societies received an average of 1.58% on fixed rate and notice accounts across 2016, compared to an average of 1.30% in the Bank of England statistics. For instant access accounts, savers with building societies received an average rate of 0.88% in 2016, compared to 0.65% in the Bank of England data.
In the mortgage market building societies have grown their share of new lending considerably in recent years, and offer competitive rates to borrowers. As a result, the gap, or spread, between mortgage and savings rates was much narrower at building societies than at other providers.
Commenting on these results, Robin Fieth, Chief Executive of the BSA, said:
“These results demonstrate that savers with building societies get a better deal on cash savings. This includes accounts closed to new deposits, showing that at a time of low interest rates across the market societies have looked after their loyal savers by providing value over the long-term.
“The figures also indicate an important difference that comes from being owned by customers, not external shareholders. Building societies exist for the benefit of their customers, who are also members. They do not have to pay dividends to shareholders and are therefore able to give more back directly in terms of better deals. It is one of the ways that mutuality is a tangible benefit to consumers.”
Notes to Editors
- Comparisons in this release 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 the nine largest societies, which account for approximately 95% of the sector by assets, using a similar methodology to 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). Explanatory notes are available here. 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 (in percent) not seasonally adjusted
CFMZ6IW: Monthly average of UK resident banks' sterling weighted average interest rate - time deposits from Individuals and individual trusts (in percent) not seasonally adjusted
CFMZ6K8: Monthly average of UK resident banks' sterling weighted average interest rate - loans secured on dwellings with a floating rate to Individuals and individual trusts (in percent) not seasonally adjusted
CFMZ6KA: Monthly average of UK resident banks' sterling Weighted average interest rate - loans secured on dwellings with a fixed rate to Individuals and individual trusts (in percent) not seasonally adjusted
- 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 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.In 2016 building societies accounted for £21 billion of the £40 billion of net new mortgage lending across the UK. By the end of 2016 the sector accounted for 22% of all outstanding mortgages. More information can be found here.