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Building Societies benefit from influx of deposits

Building societies appear to have benefitted most from the fall out of the Northern Rock crisis with amounts deposited in Building Society savings accounts swelling following an influx of deposits from customers who have withdrawn their savings from the beleaguered bank.

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, while in October as much as £3billion was deposited.

Commenting on the figures, Adrian Coles, Director-General of the Building Societies Association said

“It seems that the majority of these deposits are funds withdrawn from the Northern Rock bank, with the attractive savings products offered by building societies continuing to appeal to customers looking for the best home for their money.”

“A perception of a possible change in the economic environment may also mean that greater attention is being given to savings these days.”

The £3billion October net receipts for building societies were the highest monthly figures ever, beating the record of £2.8billion set in September, and almost four times the £772m deposited in October 2006.

In the past three months, the value of building society deposits almost exceeds the total amount received for the entire 12 months of 2006.

While Building Societies are benefitting from record inflows of deposits, banks continue to face a downturn in new savings.

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.

Customer savings have become more important to banks because the credit crunch has made borrowing more expensive.

Northern Rock is thought to have lost about half of its £24bn of deposits since mid September.