Consumers need better interest rates

A new report has expressed concerns over the low savings rates banks and building societies offer customers.

07:51 23 May 2004

A new report has expressed concerns over the low savings rates banks and building societies offer customers.

According to research by Datamonitor, lenders need to improve the rates they pay or risk losing business as confidence in the stock market improves.

The report feels that consumers will transfer money out of deposit accounts and back into shares if the markets continue to grow.

The author of the report, Vikram Sehgal, said: "Given the large number of very similar deposit accounts on offer, banks and building societies need to review their existing product range to rationalise needless accounts.

"Overall, banks and building societies should structure simplistic and transparent offerings, which signal integrity and good value to UK households."

Datamonitor said that if banks and building societies were to retain business they would have to offer interest rates that tracked base rates consistently, not just for a brief introductory period.

According to its research, nearly 67 per cent of savings accounts currently offer rates of less than three per cent, despite the fact that the Bank of England base rate now stands at 4.25 per cent.

The group suggested that banks and building societies should also proactively review customer accounts with high levels of deposits, and either raise rates or upgrade consumers to premier banking services.