Following the recent credit-crunch, caused by the 2007 American sub-prime mortgage crisis, banks have become increasingly wary of entering into mortgage deals with consumers. The number of approved mortgages in the UK dropped to an all-time low in March 2008; moreover mortgage providers are looking to boost their profit margins in order to ride through the prevailing tough market conditions, making it harder for prospective homeowners to get favourable terms on a mortgage.
However, this is not all bad news for consumers. In order to compensate for the loss of earnings from mortgages, banks are offsetting the funding shortage through its retail customers by offering better deals on savings accounts - some banks have not even lowered their savings rates despite the lowered Bank of England base rate. According to findings by MoneySuperMarket.com the average rate of the five best instant access savings accounts is 6.42%, well above the current base rate of 5%.
So while the mortgage terms offered by banks have become less favourable to consumers, they can take heed that the market for savings is becoming more buoyant as banks compete for business in this area. In addition to providing consumers with a constant income stream through interest, high interest accounts are also lower risk than alternatives such as stocks, bonds and other financial instruments.
Applying for a high interest account can be done quickly online, with several specialist websites allowing for comparison of different accounts based on factors such as interest rates, withdrawal restrictions and minimum deposits and balances. Due to the increased competition, customers are urged to spend adequate time researching different banks, as the increased competition means there is less need to compromise their own terms.
For example, some might think that opening a high interest account will require a minimum deposit of several thousand pounds, but one leading national bank is offering savings accounts with a minimum balance of just £1. At the same time, while the account in question offers unlimited access to the funds, it bears no interest in a month where funds are withdrawn from the account.
Ultimately consumers have to deal with the realities that the credit crunch has brought upon the financial market, but truth be told there hasn’t been a better time in recent memory to start a savings account. So rather than lament the recent credit crunch, why not go online and see whether you can save money with a high interest account?
Disclaimer:
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.
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