After a long period of the only the most proactive savers switching, the savings market sprung into life in the final three months of 2022 as competition intensified in the sector and rates increased.

We look at some of the latest trends.

What does the Bank of England data show?

The BoE’s monthly Money & Credit update tracks household deposits. Its February update, published in March, showed households deposited an additional £1.6 billion with banks and building societies in February, down from £3.3 billion in January.

The Bank’s data shows the savers are moving money from interest-bearing easy access or current accounts (referred to by the BoE as Interest Bearing Sight) into fixed-term variants, known as Interest Bearing Time Deposits.

Net flows (the amount of money placed in these accounts vs the amount withdrawn) into term accounts were £6.8 billion in February, slightly lower than the £7.0 billion recorded in January, but still significantly above the monthly average over the past five years.

Conversely, the net outflow of interest-bearing instant access deposits was an outflow of £6.1 billion during the month, with non-interest bearing access deposits – down £3.6 billion. 

A move towards fixed and ISAs back in fashion

The BoE data is mirrored by data from CACI, which compiles the savings deposits of 34 leading providers of adult cash savings.

CACI’s data showed the value of savings in fixed-rate accounts ended the year at £180.5 billion, up from £151.6 billion at the end of September 2022.

Within the overall switch-to-fixed, fixed-rate ISA performance was particularly strong. Fixed-rate ISA balances ended the year at up 12% from the same period in 2021 and 20% over the last two years.

Non-ISA instant access accounts grew from £628.3 billion in September to £632.8 billion in December, but ISA instant access variants fell from £176.4 billion to £167.8 billion over the same period.

Savers react to rate

Savers recorded the highest level of switching activity on record during the fourth quarter of 2022 as they responded to rising rates.

Paragon’s analysis of CACI data showed that savers placed £73.5 billion into new savings accounts during the final three months of last year. The figure was nearly as much as the £78.7 billion placed during the whole of 2021. A new account is classed as one that has been funded with at least £1 and has an open date within a specific month.

The figure represented an 84% increase on the £40 billion placed in new savings accounts during the third quarter of the year, and a 317% increase on the £17.6 billion recorded in the corresponding period in 2021.

CACI’s figures show that £33.9 billion was opened in non-ISA instant access accounts during the quarter, with £22.4 billion placed in non-ISA fixed-term accounts. With regards to ISAs, £4 billion was opened into instant access variants, with £12.7 billion in fixed-term ISA accounts as signs of increased ISA take up show through.

What’s next for savers?

Savers indicated a preference for fixed-rate savings when asked about how they plan to invest over the second quarter of the year. Our survey of 2,372 savers aged 55 or over showed that nearly one in five (18%) said they would increase their level of savings in fixed-rate non-ISA accounts, with 20% opting for fixed-rate ISAs.

Access accounts were less popular – 14% plan to grow savings in ISA versions, with 13% increasing savings in non-ISA access accounts.

In terms of other investment types, 4.8% said they would grow savings in investment funds, with 4.7% putting more money into individual company shares. Meanwhile, 4% plan to grow investment in property, 2.8% in corporate bonds and 1.3% in alternative investments, such as art or antiques.

Only 0.12% of savers intend to increase their investment in cryptocurrency.