Gap narrows between fixed and instant savings - Savings - News - Moneyfacts

News

Moneyfacts.co.uk News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

Gap narrows between fixed and instant savings

Gap narrows between fixed and instant savings

Category: Savings

Updated: 01/03/2012
First Published: 01/03/2012

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Savers are missing out on millions of pounds in interest by choosing instant savings accounts instead of fixed products – but the gap is narrowing.

Using data from Moneyfacts.co.uk and the Bank of England, research by first direct has found that by choosing not to fix their savings in favour of instant access accounts in 2011, UK savers have seen a loss of possible interest earned of £551 million.

While significant, this figure, although £86 million smaller than the £636 million lost in 2010, is mainly due to a fall in fixed account interest rates and a small rise in instant access rates.

The figures are based on a savings balance of just over £3,200; on an average one year fixed rate account offering 2.00% savers would receive interest of £64.86. Savers with average access accounts would receive far less at £7.72.

On average, this represents £57.14 in lost interest to each saver who has opted for the flexibility of having instant access to their savings over the past twelve months, smaller than the £64.53 average loss in 2010.

In fact, it is the smallest amount lost over the past five years as the low base rate environment shows no sign of abating.

Despite 2011 representing the largest average savings balance in the past five years (£3,243) the fall in fixed interest rates from 2.75% to 2.00% has increased the traditional dilemma of whether to fix or twist with savings.

However, savers can get one year fixed rate accounts offering in excess of 3.00% if they shop around.

"While historically, the benefits of fixing your savings has been clear cut, in the current interest rate environment the distinction is less obvious," said Bruno Genovese, head of savings at first direct.

"With inflation falling, and continued economic uncertainty, many savers will be tempted to try to ride out the storm and maintain flexibility with their money.

"When choosing whether to fix or have easy access to their savings, people need to be clear on what they are saving for. If it is more of a rainy day fund for use in case of unexpected events or emergencies, instant access savings are the best idea.

"However, if the main reason for saving is a particular goal such as a housing deposit or a new car, fixing your savings may be the better option."

p>Find the best savings rates for you - Compare savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Just 44 savings accounts beat inflation

Inflation recorded another large jump during December, and predictably, this has had a devastating impact on the number of savings accounts that beat it, so much so that you’ll need to lock your money away if you want an inflation-beating return.

Just 47% have money in a savings account

We’re often told of the importance of saving, yet unfortunately, the message doesn’t always get through. Indeed, research shows that just 47% of those surveyed have money in a savings account, and 17% have no savings or investment whatsoever.

How much will you save this year?

Many of us have set savings goals for the year ahead, and planning to budget better and save more will be at the top of many financial resolution lists. But how much are you hoping to squirrel away? Encouragingly, many people have impressive targets.
 
Close