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Introductory rates on savings accounts to be investigated


So-called ‘teaser’ rates on cash savings accounts are to be investigated by the Financial Conduct Authority (FCA).

The headline rates are put on savings accounts to attract consumers, but usually only last for a specific period of time, usually a year. After this initial period the rates fall, sometimes significantly, leaving savers earning a poultry amount of interest on their money.

The FCA has now said that it will launch a review into these headline rates, after saying lenders are “taking advantage of customer inertia”.

Around eight out of ten adults in the UK have a savings account to their name, and cash savings are a popular choice; offering a guaranteed interest rate and little risk to savers.

The FCA has been keen to confirm that this review is not based around mis-selling, and is not an investigation into the actual products.

Instead however, it is a case of taking advantage of consumer behaviour. Providers know that few customers are likely to move their money once the headline rates finish, so offering an attractive rate for a set period of time becomes worthwhile.

Martin Wheatley, Chief Executive of the FCA, said: “Promoting effective competition and ensuring that markets work well is a key objective of the FCA.

“In looking at cash savings, we will examine an area that affects most people and see if there is action we need to take. We know that switching rates are low for financial services products and savings accounts are no exception. Even when people do switch their accounts, they are twice as likely to go with their existing provider, than move to the offering of a competitor”.

The review is expected to be concluded in 2014.

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