Experts are advising consumers with money to stash away to grab some of the top savings accounts before they are withdrawn. Those with instant access savings accounts are recommended to shop around for the best interest rates, whilst those wanting to invest in a fixed rate account should lock into one before it is too late.
A study of instant access savings accounts by comparison site moneyExpert.com found that the number available that pay higher than base rate fell from 270 to 145 between January and July this year. Savings expert Joanna O’Brien from Moneyfacts says, ‘The top-paying one and two year fixed rate bonds are still around for now, but we are seeing more fixed rates withdrawn and where changes happen the trend is for rates to come down.’ She adds, ‘The same is true in the instant access savings market. The top rates remain, but there has been a general trend for rates to fall in recent months.’
Meanwhile, Sean Gardner from Money Expert suggests shopping around for the best savings account interest rates. He says, ‘The drop in instant access rates is encouraging savers to look at different accounts. Rates are better for fixed-term and regular savings accounts.’ He advises watching interest rates carefully, saying, ‘It is a savers’ market so don’t accept a bad rate. If your account is no longer competitive then switch.’
For those customers who have money hidden away in bank and building society savings accounts that they may have forgotten about lies the prospect of having their money taken and used by the Government to fund various good causes. Next year, over £400m is expected to be appropriated from accounts that have laid dormant and seen no customer activity for more than 15 years.
Rachel Le Brocq from the Building Societies Association (BSA) thinks that money could be leaving bank accounts as early as next summer. She notes that, ‘Even after distribution, the money legally remains the property of the account holder, but it would be easier on all concerned – including the charities set to benefit – if people come forward now rather than wait for the account to be closed and the money moved away.’
For many people, the very idea of forgetting about money that has been stashed away seems totally impossible. For them, it is finding extra money that is imperative. The amount of debt taken on by consumers this year was higher at 7.3% than the growth rate of GDP (gross domestic product), which rose by just 5.1%. During 2008 to the end of June the total mortgage, loan and credit card debt rose to £1.44bn, whilst total UK output was £1.14bn. Many people are turning to debt consolidation loans in an attempt to solve their problems.
Stephen Gifford, chief economist at Chartered Accountants Grant Thornton, comments, ‘UK economic growth has chugged along quite nicely thanks to rising consumer spending, which has largely been on credit. While most debt is perfectly serviceable and secured on dwellings, the rising number of insolvencies and repossessions is testament to this process having a negative outcome for an increasing number of individuals.’
With negative forecasts for the economy this week ever increasing, prospects look bleak for many people. Debt is expected to rise with many more looking for debt consolidation in the hope of solving their financial misery. The Citizens Advice Bureau is expecting further rises in its caseloads related to credit issues and has found that increasingly people are struggling to meet day to day expenses.
Sue Edwards, CAB’s head of consumer policy, says, ‘More people are coming to us now because they are worried about not being able to pay their essential household bills and continuing to rack up mortgage arrears, fuel debt and council tax bills.’ Mike Gerrard, a personal insolvency partner from Grant Thornton, says, ‘It will be the next six to twelve months which reveal how seriously the credit crunch has affected individuals.’