Building societies benefit as savers seek save haven
According to the Building Societies Association (BSA), over one million people opened a new building society savings account last year.
Building societies have benefited since the collapse of Icelandic banks, Icesave and Kaupthing Edge, and the near collapse of Northern Rock, Bradford & Bingley, RBS, HBOS/Lloyds. The BSA said an additional 1.2 million accounts (net of closures) were opened during the 2008 year.
As a result, an extra £9.9 billion was held by building societies in December 2008 than in January the same year.
In the 16 months after the onset of the credit crunch (September 2007), building societies gained £20 billion in net receipts – an increase of almost 70% compared with the £11.9 billion acquired in the 16 months before.
Commenting on the figures, Adrian Coles, director-general of the BSA, said “The low interest rates that we currently have reduce the incentive to save, but the popularity of building society savings accounts is such that an additional 1.2 million accounts were opened over the last twelve months.”
However, building societies suffered a net £390 million outflow of funds from savings accounts in January 2009 but this is traditional at the start of the year due to withdrawals to cover Christmas expenditure so when this has been accounted for, inflows were healthy, said the BSA.
Mr Coles remarks that “The withdrawal represents less than 4% of the total net receipts received by building societies in 2008.”
In comparison, the British Bankers’ Association (BBA) said deposits at High Street banks fell by £2.3 billion – the first significant drop in a decade and the biggest since the BBA started gathering data in 1997.
The drop is primarily due to customers transferring money due to the heavy cuts in interest rates. Furthermore, rising unemployment meant that customers withdrew funds to pay for their mortgage and other such bills.
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