Challenger banks continue to drive competition in the savings market
Within all the doom and gloom of falling savings rates you can’t help but notice there’s a new breed of providers bringing what little competition there is and driving the market; the Challenger Banks.
During what has been one of the toughest ISA seasons we’ve ever known, unlike the high street banks, the challengers have offered up some market leading ISA deals, as well as other savings accounts, to temp us to save.
The latest to launch, Charter Savings Bank, appears to be doing everything it can to dominate the best buy tables.
Now is the time of the Challenger Bank.
Look back to over 6 years ago, before the Bank of England reduced the base rate to just 0.50% and the savings landscape looked very different. The likes of Santander, Halifax and Nationwide would regularly appear in the best buy tables, usually with bonuses and ever changing issues of the same named account. Fast forward to today and many of the high street banks have simply disappeared from the savings limelight. Their energy seems firmly focused on getting current account business rather than trying to raise money from savers. They appear even less interested in retaining their existing savers, as they continue to make cuts to their savings rates on a weekly basis.
The change in the market has given the new breed of banks time to shine. Metro Bank made a big splash back in 2010 with the launch of the first high street bank in over 100 years. We’ve also seen the emergence of Shawbrook Bank, Vanquis Bank, Aldermore Bank, Harrods Bank, Hampshire Trust Bank, Paragon Bank and Charter Savings Bank to name but a few. Although some of these providers have been around for many years, the names may not be instantly recognisable. But where would we have been without them in recent years? And there’s more to come. The Governor of the Bank of England has reportedly got dozens of new banking licence applications awaiting approval, so expect more names in the coming months and years.
As well-known savings brands have almost disappeared from the savings market, the best buy tables are now littered with new names, taking advantage of the lack of high street bank activity to promote their brands. The majority of the providers are covered by the UK FSCS (Financial Services Compensation Scheme) and of course regulated by the FCA (Financial Conduct Authority) and the PRA (Prudential Regulation Authority) so provided you’ve no more than £85,000 individually or £170,000 in joint names, with each brand and/or providers banking licence (see our guide to banking licences), there seems little difference in saving with a challenger bank than there does with a high street bank, apart from the rate of course.
If you’re unsure, you can always speak to one of our advisers by calling 0800 321 3581 as we’d be happy to talk you through each provider’s background and rates on offer. And we’d be happy to share our experience of them including their customer service. Not every bank has a glowing report but that goes for the high street, as well as the new providers.