Savers record highest level of switching ever
Meanwhile cash held in current accounts has peaked – down £13.5bn in the final three months of 2022 – the biggest shift in over a decade.
Analysis by Paragon Bank suggests that people are moving cash held in their current account to savings accounts. It recorded the highest level of switching activity on record in the savings market during the fourth quarter of 2022 as savers responded to rising rates.
CACI compiles the savings deposits of 34 leading providers of adult cash savings. Paragon’s analysis of CACI data showed that savers placed £73.5bn into new savings accounts during the final three months of last year. The figure was nearly as much as the £78.7bn placed during in the entire of 2021.
The figure represented an 84% increase on the £40bn placed in new savings accounts during the third quarter of 2022, and a 317% increase on the £17.6bn recorded in the corresponding period in 2021.
About £33.9bn was opened in non-ISA instant access accounts during the quarter, with £22.4bn placed in non-ISA fixed-term accounts. With regards to ISAs, £4bn was opened into instant access variants, with £12.7bn in fixed-term ISA accounts.
Transfer of cash held in current accounts
Paragon said the transfer of cash held in current accounts could be driving the change. Current account balances surged during the pandemic as people stored excess money in their current accounts.
CACI’s data shows that at January 2020, £313bn was stored in current accounts, rising to a peak of £460bn in September 2022. That trend had started to reverse and current account balances ended the year at £447bn.
Derek Sprawling, Paragon Bank savings director, said: “The rate of new account openings was phenomenal during the fourth quarter of last year as savers woke up to the benefits of placing their money into accounts with rates that work harder for them.
“Our analysis shows that a significant amount of cash held within current accounts moved during this period, so we would expect that money to have been directed towards savings accounts offering better rates. However, even though we have early indications of the trend continuing into 2023, there is still hundreds of billions in deposit balances receiving rates below 1%.”
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