Over 800,000 Knee Jerk Fixers Need Instant Access
Released
on: October 1, 2009, 9:30 am
Author: uSwitch.com
Industry:
Financial
This year really has been a savings rate massacre for
consumers, with rates falling to historic lows in line with the
plummeting base rate. New research from uSwitch.com reveals that in
response to this rate land slide, 9 million savers have locked away a
total of £131 billion in fixed rate savings accounts in a
desperate bid to bag a decent rate. Unfortunately, a turbulent
financial climate has led to almost one in ten of these consumers being
forced to access their savings early due to job losses (6%) and
mounting housing bills (32%). As a result, these savers have incurred
penalty fees averaging £132 each.
In total, over 800,000 consumers have made an average withdrawal of £3,738 each
from their fixed rate account in the last year, with over a third of these incurring
penalty charges. As a result, these cash hungry savers have racked up a total bill
of £40 million in withdrawal penalties which are predominantly made up of interest
charges. Going forward this issue is only going to get worse as a further 1.7
million (19%) people with fixed rates claiming that they might have to access their
money early.
With each of these savers locking away a total of £14,237 each, this has clearly
made a positive boost to the UK’s £1.1 trillion savings pot which is held by 35
million consumers. This may sound like a lot of money in the current climate but
it’s hardly surprising as further reports have shown that the amount of money
consumers are stashing away has actually gone up by 26% since January this year.
However, with 47% of fixed rate savings accounts offering consumers absolutely no
access to their money before the end of the term, it’s hardly surprising that 6% of
these knee jerk fixers already regret locking their money away. 87% of fixed rate
savers only chose this type of account because it was the only decent rate available
at the time and 17% admit to making a rash decision.
Rumina Hassam, savings expert at uSwitch.com, comments: “Fixed rate
savings accounts can offer consumers some really competitive returns, but the
reality of this extra interest can be harsh. Almost half of the accounts available
do not allow consumers to access their cash under any circumstances which, in a
climate of recession and redundancy, is a dangerous situation for some people. The
devil really is in the detail as far as fixed rate savings are concerned. Even if
consumers are allowed to make withdrawals, the extra interest earned could be
completely wiped out by the penalties incurred.
“Consumers that might need to access their money should think really carefully
before investing in a fixed rate savings account. Some deals offer more flexibility
than others but the general rule of thumb is that accounts with limited access and
longer investment terms will offer the highest rates. Also, with the base rate
expected to creep up again over the next year and savings rates likely to follow
suit, longer term fixed rates may not be the best option.”
Variable rate savings deals are on the up and there are currently deals paying as
much as 3.3% with no restrictions on access with Citibank. This explains why 37% of
people don’t feel their rate is quite as competitive as it seemed when they first
took it on. The average one year fixed rate bond now pays an average of 3.11% but
Chelsea Building Society is offering as much as 3.8%. Five year bonds have gone up
from an average of 3.33% to 4.61% since January however, one year fixed options have
actually dropped down from 3.62% to 3.11% in the last nine months. For details of
the best savings accounts available consumers can log onto www.uswitch.com.
See
the full version of this press release.
For more information please contact:
Tracy North 0207 802 2925 / tracynorth@uswitch.com
About uSwitch:
uSwitch.com is a free, impartial online and telephone-based comparison and switching
service, helping consumers compare prices on gas, electricity, water, heating cover,
home telephone, broadband, digital television, mobile phones, personal finance
products and car insurance.
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