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The amount of cash sitting in UK accounts not paying any curiosity was greater than £276bn in December final yr, new Financial institution of England knowledge has proven.
The December determine was just under the document of £282bn, set the month earlier than, sparking considerations from consultants that buyers holding money in zero curiosity accounts would see their cash eroded by inflation.
Which?, the patron group, stated there might be a number of explanation why individuals have been leaving their cash in non-interest bearing accounts.
“People could want their cash easily accessible for a rainy day or they may not realise the rate has tumbled since they first opened the account,” stated Reena Sewraz, a Which? cash knowledgeable.
“There are some good interest rates available so it’s well worth shopping around and moving providers if your bank isn’t paying interest,” she added.
As of December final yr, the typical fee on an quick access money account, with £10,000 in financial savings, was about 3 per cent, in response to Moneyfacts.
Laith Khalaf, head of funding evaluation at funding platform AJ Bell, agreed it was “puzzling” that a lot cash was being held in such accounts when rates of interest have been so excessive.
“Back when interest rates were near zero, it wasn’t hugely rewarding to move from an account paying no interest, but that has now dramatically changed,” he stated.
Khalaf identified that prime financial savings accounts paid greater than 4 per cent, saying “many savers could do themselves a huge favour by switching to more competitive accounts”.
Regardless of calls from consultants for customers to get the perfect deal for his or her financial savings, the amount of cash held in non-interest bearing accounts has doubled over the previous decade from £135bn, and now accounts for 15.5 per cent of all cash held by people in accounts and money Isas within the UK, in response to BoE knowledge.
Khalaf warned that these holding cash in non-interest bearing accounts would see that eroded over the subsequent yr as a result of inflation, which the Financial institution of England has projected will hit 3.7 per cent.
“For money held in an account paying no interest, that means every £100 would see its buying power reduced to just over £96 in the course of a year,” he added.
“Even if inflation returns to its target [of 2 per cent], it will still erode the value of money that isn’t growing.”
The Financial institution’s evaluation coated accounts the place any money on deposit could be withdrawn with out discover or penalty. It additionally coated conditions the place money was in transit.
Final yr, the BoE stated reporting points had meant some financial savings had been wrongly categorised as being in interest-bearing accounts, with £44bn subsequently reclassified as being in zero-interest accounts within the financial institution’s November 2024 knowledge.
