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3 savings trends impacting the market 

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What are the trends impacting the savings market?

We have analysed some stats provided by our data partner, CACI, which captures savings data from more than 30 leading savings providers (including Paragon), in order to bring you an overview of some of the key trends impacting the savings market.

Trend one: the savings market reached a new high late last year

Our data analysis shows that the total saving market registered by CACI spiked to a record £986 billion in October 2021 following a static period during Summer and early Autumn, with the average savings balance now standing at £12,431.

This is despite the market showing a small dip in value the month before (September). October saw the market return to its pattern of growth, with a £7.4 billion increase in value month-on-month and a 3.7% increase year-on-year.

This October increase comes after savings balances remained static between July and September at around £978 billion, reflecting the impact of lockdown lifting on households’ saving and spending habits.

Total savings recorded by CACI has grown by 9.1% since the pandemic began, climbing from £903 billion in March 2020 to the latest available figure of £986 billion.

Trend two: easy access driving upwards trend 

The most notable spike in value was across the easy access non-ISA product category, which increased by £10 billion between September and October alone, outpacing the total savings category growth by £2 billion.

This steep upwards trend has driven the growth of the overall savings market over the course of the pandemic, with the easy access category growing by 20.2% between March 2020 and October 2021, from £505 billion to £607 billion. This category now accounts for the lion’s share of the total savings market – 62% of CACI’s savings database.

This trend has also translated to higher average balances – the average non-ISA easy access balance grew from £10,246 in March 2020 to £12,106 in October 2021.

This has led to visible growth in accounts in higher balance bands, while lower balances have lost market share. The number of easy access, non-ISA accounts with balances of £100,000 or more now account for a record 2% of the total category. This is up from 1.8% in October 2020 and 1.60% in October 2019. Over the course of the last year, the number of accounts with balances of up to £10,000 have been losing market share and those with balances in excess of £10,000 have grown in number.

Trend three: Inertia remains a trend as many easy access balances earn very low interest

Despite the easy access market continuing to see strong growth, a large segment of those balances are still receiving a low rate of interest.

Despite a gradual uptick in rates since last Summer, 71% of easy access balances continue to earn a rate of 0.1% or less – less than six times the best rates available in the best-buy tables. This figure has been fairly consistent throughout the year, dropping from 72% in August.

This is likely due to inertia and savers choosing to open a low-paying instant access account that is linked to their current account.

What did our experts have to say? Our savings director Derek Sprawling commented on the current market:

“CACI’s member banks saw the savings market’s growth remain flat throughout Summer and early Autumn. Although the easy access category continued to grow at a steady pace throughout this period, the reduction of other categories, such as fixed rate products, balanced that out to create a static market.

“The dominant trend that we are noting in the easy access space is that seven out of ten savers continue to receive a really low return on their money. This is despite rates picking up across the board and best-buy deals currently offering people the opportunity to earn at least six times more interest than they currently are in a low-paying account. Savers in low paying accounts are missing out on considerable interest so it’s important for people to look for the best deal.”

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*AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded on an annual basis.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551