Customers are considerably better off choosing a cash ISA from a building society than they are from a bank, according to new research.
After comparing hundreds of ISA offers, researchers have found that building societies are consistently offering higher rates of interest on their ISA accounts than the high-street banks are on comparable products.
Only one of the top six bank-offered ISAs carried a competitive rate when compared to its building society counterpart, whilst mutual lenders paid an average of more than 0.35% more interest a year on the remaining five comparable accounts.
Commenting on the news, the campaign’s Chief Executive, Laura Willoughby MBE, said:
“This ISA season, it is more important than ever to move your money to a mutual provider, as bank interest rates have completely plummeted. Building societies are rewarding their customers when they put money away for a rainy day, whereas the big banks have slashed interest rates to pitiful levels that are well below inflation.”
In analysing the data, the website has highlighted the impact of the Funding For Lending scheme, which has made cheap credit available to the big banks if they use it to lend.
Laura Willoughby continued:
“The Funding for Lending Scheme was supposed to kick-start our economy, but instead lending to businesses has nose-dived whilst hard-working savers are getting absolutely clobbered. Banks have become bloated on cheap credit and low interest rates, and now they couldn’t care less about savers’ deposits.
“Whilst the banks’ lending and profits are tumbling like a house of cards, building societies are putting more money back into the real economy and into peoples’ pockets. Building societies don’t gamble on the stock market, so you know your savings are supporting genuine businesses and real people, not ridiculous bonuses and risky speculation.
“By moving your money to an ethical, local or mutual ISA, you can help to support local businesses and better financial institutions – whilst doing yourself a favour and picking up a better savings rate.”
The news comes at a time when building societies account for 87% of net mortgage lending in the UK, as well as having increased loans to individuals in 2012 by 20%. Already in 2013 several of the major building societies have announced significant profits growth in 2012 of between 21-49%, whilst still offering better savings rates than the banks on average.
Like other mutuals, building societies only use their savers’ money to fund mortgages and loans, rather than investing in financial markets. In the words of Jeremy Palmer, BSA Head of Financial Policy: “Any deposits you place with any of our members help provide housing finance for ordinary people – they cannot be used in casino banking because we don’t do that.”
Because of this structure, building societies “have had a ‘good’ credit crunch” compared with the big banks, and have remained “largely untouched by PPI and other consumer storms,” according to auditing giant KPMG.