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Fall in number of introductory bonus accounts

Fall in number of introductory bonus accounts

Category: Savings

Updated: 01/05/2013
First Published: 01/05/2013

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 It is now over 6 months old so the content may be out of date.

Research by Moneyfacts.co.uk has revealed a stark reduction in the number of savings products including introductory bonuses in their initial rate.

Over the past two years, the volume of easy access savings rates boosted by a bonus has fallen by 68%, with just 32 no notice accounts including bonuses compared with 101 in April 2011.

Over the past couple of years, introductory bonuses have been adopted by many savings providers as a way to inflate an account's initial rate to attract business, particularly within the popular easy access market.

The fall in the number of introductory bonus accounts is thought to be a result of the Government's Funding for Lending Scheme (FLS), launched last August to encourage lenders to lend to individuals and non-financial businesses.

Banks had previously relied on savings accounts as a way to fund their mortgage rates. However, the FLS has meant banks no longer have to rely on savings rates, thanks to low cost funds offered to them by the Government.

Additional research by Moneyfacts.co.uk found that despite a reduction in the number of accounts with introductory bonuses, appetite amongst savers for such accounts remains high.

Sylvia Waycot, Editor of Moneyfacts.co.uk, said: "It's easy to underestimate the importance of the easy access account. It is the staple of any savings portfolio; it is the place to stash emergency money if ever the washing machine or car breaks down. It is the place to save for short term items such as a holiday or Christmas and it is also the first savings account of choice for those new to the savings habit.

"Today's easy access accounts are being battered from all sides, they are dwindling in number and therefore choice. The number of accounts that offer a bonus is on the verge of disappearing and rates are being slashed.

"Bonuses have received mixed reviews, some people love them, others loathe them because of their temporary nature. However, anything that gives you more interest, even if only for a short time is better than nothing at all.

"Sadly, bonuses have been a bit of a sitting duck and with such paltry underlying rates on offer, the bonus is an obvious place to cut. The fear is, are they now on the road to extinction?" she concluded.

What next?

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