Building societies are winning the dogfight for personal deposits with record inflows boosted by former Northern Rock savings, while banks continue to face a downturn in new savings.
The Building Societies Association reported that a total of 2.3bn was received by its members in November, almost three times the amount received the previous year. In the past three months, building societies have received the same value of new deposits as they received in the entire 12 months of 2006.
The total is slightly lower than the exceptionally high figures seen in September and October, when Northern Rock savers began moving their money to the safety offered by building societies due to tight funding restrictions. But market-leading interest rates are also continuing to attract savers, with some, such as Manchester and Newcastle building societies, consistently topping several savings league tables, according to the comparison site Moneyfacts.
Meanwhile total monthly savings deposited in banks dropped by 0.2bn in November, to 1.3bn, according to the British Bankers' Association (BBA), significantly lower than the average over the past six months of 2.5bn per month.
"In comparison with historic trends, inflows to current, deposit and savings accounts remained weak in November," said David Dooks, statistics director for the BBA, but he only partly blamed depositors' uncertainty over Northern Rock's future.
Banks and building societies are battling for deposits as lending growth slows and customers try to save ready for a time of greater economic uncertainty. Only 20 per cent of banks or building societies have so far passed on the December base rate cut to their customers.
Deposits have become more important to banks because the credit crunch has made borrowing in wholesale markets more expensive. Northern Rock is thought to have lost about half of its 24bn of deposits since mid-September.Reuse content