Building societies experience record 6 months for savings accounts

30 July 2008 / by Rachael Stiles
Building societies have experienced a record first half of the year for savings accounts deposits, receiving twice as much in the first six months of 2008 than in the same period in 2007.

According to the Building Societies Association (BSA), deposits into savings accounts held with building societies almost doubled from £3,862million in the first half of 2007, to £6,296million this year – a record breaking inflow of savings.

As banks and building societies lean more towards the relatively safe domain of deposits and away from high levels of risky mortgage lending, savers are able to take advantage of the price war which has ensued.

Highly competitive interest rates in addition to other benefits are enticing savers to return to a more traditional way of investing their money as they similarly avoid the instabilities in the stock market and wider economy.

"With an uncertain economic outlook and stock market turbulence, savers are wisely viewing building societies as excellent homes for their money. The excellent products and trusted brand names of building societies mean that savers know that societies are the place for their savings when times are uncertain," said Adrian Coles, director general of the BSA.

With mortgage lending in decline as house prices plummet, rates rise, and would-be home owners don't have the cash available for deposits and fees, banks and building societies are turning elsewhere.

"Net lending for societies was down from £8,429 million in the first six months of 2007 to £3,448 million in the equivalent period of 2008." Mr Coles commented. "It is no surprise that the lending figures for societies are so low. This reflects the depressed state of the housing market. Many societies have chosen to follow a conservative lending policy to ensure that they maintain the high quality of their loan books."

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