In the face of uncertainty brought about by the Covid-19 pandemic, many households across the UK are being cautious with their money. A significant amount self-report to have actively changed their daily spending and saving activity. The savings data from the Office for National Statistics (ONS) shows that households across the nation had begun taking a cautious approach in the lead up to lockdown.
Furthermore, market data highlights that households have accelerated their new savings habits as lockdown has continued, irrespective of whether they are still in employment or on furlough. This has resulted in a significant increase in bank deposits, a reported £14.3bn in March 2020, followed by £16.7bn in April 2020 and a sharp rise to £25.6bn in May 2020, according to the Bank of England statistics.
Brian Firth, UBL UK’s Chief Executive Officer comments, “A significant amount of the UK population are now working from home, and suddenly have less of a need to spend or have reduced opportunities to do so. Money that would normally be spent on expenses such as commuting to work, eating out at restaurants could now be saved instead, and the savings market has seen significant inflows in the past months as a result.”
He adds, “as high street banks continue to offer little reward for savers, many are turning to the ratings tables and to banks like UBL UK who offer greater return on savings products, whilst also offering FSCS protection.”
Despite an overall increase in savings inflows, it is stressed by the think tank, The Resolution Foundation, that the experience was not the same across the board. Both the think tank and the Office of National Statistics (ONS) highlighted that the under thirties have been the hardest hit as many were impacted by reduced income as a result of the lockdown, coupled with less savings to tide them over. In addition, lower-income households were twice as likely as households with higher income to have increased their debts in the midst of the crises to meet their day-to-day expenses.
Ahmed Nabi, UBL UK’s Senior Treasury Manager adds, ‘over the past 6 months the high street banks have offered very little return on their savings accounts and this has led to consumers turning to challenger banks like UBL UK to manage their savings. UBL UK remain top of the 3 and 5 Year Conventional Fixed Rate ISA tables, as well as offering savers FSCS protection.’
He adds, “however, the gap between Instant Access and longer Fixed Term Deposit rates has narrowed in recent months and market data shows there is a preference by savers to opt for shorter term or easy access savings accounts. This is in an attempt to generate interest, whilst providing flexibility in the medium term for any rainy day needs or to respond in the hope that rates will start to increase.”
Covid-19 has undoubtedly changed customer behaviour at an unprecedented rate and these behaviours are expected to continue for the long-term. Customers will do well to break larger deposits into a blend of products across instant access, notice and fixed term to maximise yield whilst also protecting themselves from potential interest rate movements in the medium to longer term.
UBL UK are here to support customers during these uncertain times. Customers contacting the Bank will be given support depending on their specific individual circumstances.
Our Customer Service lines are open from 9:15am to 5.15pm Monday to Friday as normal (0121 753 6000). Alternatively, you can leave a message on our Contact Form or on our Facebook page and one of our friendly advisors will be in touch.
(Rates correct at 02.09.2020)