The cash savings market is undergoing a notable shift marked by a surge in interest rates. Recent data released by the Financial Conduct Authority (FCA) has revealed that this market has become more competitive than in July, with several easy access accounts offering an interest rate of more than 5%.
Notably, the FCA's commitment to monitor firms and market trends has resulted in a significant change. From July 2023 to October 2023, there was a shift in deposit volumes, with a reduction of £11 billion in non-interest-bearing and easy-access accounts. The amount in the fixed-term and notice accounts increased by £17 billion.
Sheldon Mills, the FCA's Executive Director of Consumers and Competition, mentioned: "There is a more competitive savings market now than July, including many easy access accounts paying above 5%. But there are still low-paying accounts, particularly products that are no longer on sale."
Surging Interest Rates and Regulatory Changes
The average rate on easy access deposits rose to 1.99% in October from 1.66% in July. The fixed-term accounts rose from 2.94% to 3.52% in the same period. Currently, there are several accounts offering rates of 5% or higher.
The introduction of the consumer duty has prompted the evaluation of fair value assessments, especially for low-paying savings accounts. The focus is to enhance transfer performance, ensuring customers can swiftly switch to better-value products. The UK's regulator has challenged firms offering low-interest rates to respond.
Recently, the FCA introduced a proposal requiring personal investment firms to maintain adequate reserves to cover compensation costs arising from poor financial advice, adopting a "polluter pays" approach.
The FCA's latest proposal ensures that investment firms responsible for substandard advice are financially equipped to compensate consumers. The "polluter pays" rule intends to shift the burden from diligent advisors to firms responsible for harmful advice.
FCA Reveals Latest Investment Patterns
Separately, the FCA has intensified actions against dormant license holders, aiming to reduce the risks associated with inactive firms misleading consumers. The agency's report for the third quarter outlined the amendment of financial promotions, primarily in retail investments and lending sectors.
In May, the FCA released the findings of a study that delved into the intriguing world of young investors. The research revealed the tendency for shorter-term thinking in investments among these investors. It noted that young people, more so men, were inclined to invest despite identifying warning signs.
