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Building societies beat banks for suffering savers

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22/02/2016
Building societies consistently offer better value to long-suffering savers than their banking counterparts, as average savings rates continue to fall despite no movement in the Bank of England Base Rate.

Savers holding variable rate ISAs with banks have seen their interest rates fall by a massive 47% in five years, down from an average of 1.72% to just 0.91%, while building society rates on the same products have fallen from 1.72% to 1.25% on average, according to analysis by Savingschampion.co.uk.

Those with instant-access accounts have also seen significant falls, with bank customers seeing their rates down by more than a third (36%) from 0.91% to 0.58% on average. Building society rates on these accounts have also fallen, but far less steeply from 1.03% to 0.83% on average at the end of last year.

New, so-called ‘challenger banks’ were the exception and are working to “entice new savers”.

Susan Hannums, director at Savingschampion.co.uk, said: “The challenger banks are bucking the trend and without them the banks’ figures would be even worse.”

Overall,  more than three quarters (77%) of building society accounts pay more than the Bank Base Rate (BBR) of 0.5%, compared to just 55% of bank accounts. On average, banks pay their savers 0.87% in interest, while building societies pay an average of 1.17%.

Hannums said: “It is clear that the traditional banks have little interest in encouraging existing or new savers to put more money with them, as the rates on offer continue to fall dramatically despite no movement in the Base Rate. For those savers who have an account with a traditional bank, it would be worth seeing how much better off they could be by switching.”

The top variable rate ISA is currently available from Teachers Building Society, and its Cash ISA Notice 90 Issue 5 pays 1.50%, far ahead of the bank average of 0.91% and higher even than the average building society average rate of 1.25% for these accounts.

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