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Activity in the savings market has been edging up of late, and our latest research reveals that there's another area of improvement, with the number of providers in the savings market having reached its highest point in over seven years.
Data from the latest Moneyfacts UK Savings Trends Treasury Report, due to be published later this week, show that there are now 120 savings providers in the market, an increase of 13 since the all-time low recorded in July 2013, and up five from this time a year ago.
This marks the highest number of providers seen since March 2010 to become a joint post-crisis high, and it isn't far from the record, either – provider numbers hit a peak of 126 in August 2008, just before the financial crisis took hold, so it looks as though activity is definitely returning to the market.
|Total Number of Providers||120||107||115||120|
|Source: Moneyfacts UK Savings Trends Treasury Report|
"The fact that the number of providers is back to the high last seen in 2010 suggests that the savings market is showing signs of recovery," said Charlotte Nelson, finance expert at Moneyfacts. "These new banks launching into the savings market, often referred to as challenger banks, have shaken up the market and provided a small haven for savers looking for a decent return on their savings."
But why has there suddenly been a jump in savings providers? Well, a lot of it could be due to the banks' other funding activities – many operate in the lending sphere and need money to lend out, and "with base rate low, entering the savings market is an easy and relatively cheap way for these providers to gain access to funds," explained Charlotte.
"Many who have recently launched into the savings market already had a lending arm, either in the business or personal market, and they are using savers' funds to assist the lending side of their business. Other challengers are establishing themselves in the savings market first, not only to build their brand but also to get the funds together to support any future lending."
Some are already making the jump, such as digital-only Atom Bank, who caused a stir when it first launched into the savings market earlier this year with market-leading rates, and has recently started to offer mortgages, too.
Happily, all this is having a welcome effect on savings rates, as Charlotte continues: "Regardless of motivation, there is no denying the effect these new providers have had on the savings market, particularly when it comes to fixed rate bonds.
"Thanks to heightened competition among the challenger brands seeing them fight for pole position, the Moneyfacts Savings Treasury Report has seen the average long-term fixed rate rise above 1.50% for the first time since August last year."
However, rates have still got a long way to go before they return to truly competitive levels, as despite the number of providers coming back to 2010 levels, rates have failed to rise to that height. For example, the highest-paying easy access account back in 2010 offered an impressive 2.80%, something that can't even be achieved by today's long-term bonds, while the current top-paying easy access rate is a significantly lower 1.25%.
"The reality is that without the main banks needing savers' funds again, the introduction of new banks and the boost of competition that they bring to the market does not make a significant enough difference to rates," concluded Charlotte – which is why it's so important to do your research to find the best savings rates possible. Start by heading to our savings Best Buys to compare the options, and see if you can find a better deal.
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