Synopsis
Interest rates are at their lowest levels since individual savings accounts (ISAs) began, which significantly reduces consumers’ commitment to saving. As a result, consumers those who can afford to save are starting to opt either for stocks and shares accounts or deciding to pay off long-standing debts with higher interest rates.

The average rates for savings accounts fell from 5.09% in 2008 and 1.48% in 2014, which highlights the impact of the recession and the availability of cheap funds for the banks.

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Eight out of every 10 ISAs opened in FY2013–2014 were still cash ISAs however, as savers remained risk-averse, despite banks offering the worst interest rates on record. Stocks and shares ISAs are starting to recover however, following a substantial decline in the number for accounts from FY2010–2011 to FY2011–2012. The amount subscribed to stocks and shares ISAs has increased considerably since FY2009 from GBP12.5 million to GBP18.4 million - which suggests that a smaller percentage of wealthier people, who can afford the increased risk, are filling these ISAs to the limit.

The BoE’s central bank rate has remained at 0.5% since 2009, providing banks with an unparalleled level of cheap funds, meaning that the banks have significantly less need to compete for funds from consumers. The introduction of the government’s Funding for Lending scheme providing up to GBP80.0 billion to major banks to subsidize mortgage lending has further reduced the banks’ need for funds, which has had a considerable impact on the savings market. There have been an estimated 2,560 savings products cut since the introduction of the Funding for Lending scheme in August 2012, as of November 2014.

Summary

• This report provides market analysis, information and insights into the UK ISA industry
• It provides a breakdown of the different forms of ISAs in the UK
• It analyses drivers and the outlook for the market
• It provides information on the main banks in the UK market
• It covers news and regulatory developments

Reasons To Buy

Gain an understanding of the UK ISA industry

Key highlights

Consumer credit growth has shown consistent signs of growth in 2014, for the first time since before the financial crisis. This is in a large part due to consumer confidence also recording a positive number for the first time since the credit crunch, low interest rates and a steadily growing GDP, as nearly every category of lending has grown up to July 2014.Demand for and availability of credit also grew in both the second and third quarters of 2014, which has been a key factor.

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