UK Deposit and Savings Accounts market report
“Savers are having a grim time, with an ultra-low base rate and rising inflation making it near-impossible to achieve a real return. The introduction of funding schemes by the Bank of England has also reduced banks’ reliance on retail deposits, removing the pressure to aggressively compete. Many savers, therefore, are turning to alternative products, such as high interest current accounts and peer-to-peer lending, in pursuit of better yields.”
– Sarah Hitchcock, Senior Finance Analyst
This report examines the following:
- Older savers respond very differently to low interest rates than younger savers
- Beware of overlooking the importance of branches in the drive towards digital
The retail savings market is not currently the most dynamic in the UK. Monetary policy over the past five years has dampened banks’ appetite for retail funding, leading to reduced competition. This, along with an ultra-low base rate, has led to a decline in product availability and average quoted rates on cash deposits. The situation for savers is further compounded by rising inflation.
This is unlikely to be repeated in 2017 given the additional squeeze on household incomes from higher prices, weaker earnings growth and diminished returns from cash held in savings accounts. Nevertheless, it’s not all doom and gloom. New developments in digital technology are facilitating innovation, which is changing the way financial companies engage with and service their customers. Technological advances are also paving the way for new market entrants, with 2016 witnessing the arrival of the first mobile bank, and the proliferation of saving-related apps and virtual services. The government also recently introduced new ISA products and, since April 2016, most savers are no longer paying income tax on their savings.
Taking into account these trends and developments, Mintel’s online survey explores the impact of low interest rates on saving behaviour and assesses usage of, and interest in, new digital apps and tools related to saving and money management. Product ownership is also explored, along with channel preference segmented by activity. Mintel’s consumer research is complemented by an overview of the market’s size and composition, company innovation and recent regulatory developments.
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* This is a sample representation of the report layout and does not reflect the research included in this report.
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