The Financial Conduct Authority has seen indications of a more competitive cash savings market emerging, with higher rates being paid to savers.
In an update today (December 6), the FCA said from July 2023 to October 2023, both the volume of deposits held in bank and building society non-interest-bearing accounts and easy access accounts reduced by £11bn.
Deposits held in fixed-term and notice accounts increased by £17bn.
This comes after the FCA set out a 14-point action plan to ensure banks and building societies are passing on interest rate rises to savers, as the consumer duty came into effect.
The plan, published in July, aimed to ensure that banks are communicating with customers more effectively and offering them better savings rate deals.
The FCA found that while interest rates on savings accounts have been rising, this has been happening more slowly for easy access accounts.
Between January 2022 and May 2023, nine of the biggest savings providers, on average, only passed through 28 per cent of the base rate rise to their easy access deposits.
The FCA said this update delivers on its commitment to monitor relevant firm and market trends, including setting out higher and lower easy access rates on the market and analysis of the speed and degree of base rate rises being passed on to savers.
While there has been progress, it said it expects to see continued improvement from some firms.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “There is a more competitive savings market now than July – including many easy access accounts paying above 5 per cent.
“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.”
Update so far
Since the publication of the cash savings market review, the FCA said it has seen progress in the speed and size of interest rate changes for savers and improvements in cash Isa transfers.
The average rate paid on easy access deposits in October 2023 was 1.99 per cent. This compares to an average rate of 1.66 per cent in July 2023 (prior to the publication of the review) and 0.89 per cent in January 2023.
The equivalent for fixed-term accounts (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 per cent in July rising to 3.52 per cent in October.
There are rates much higher than this available, including many accounts that currently pay 5 per cent or higher (for both easy access and fixed term deposits).
As of December 4, there were 311 instant/no notice accounts available paying over 3 per cent, 173 over 4 per cent and 37 over 5 per cent.
