Savings boosted by interest rate rises

More than 13 million people have increased the amount they are saving, following recent increases in interest rates.

09:57 29 September 2004

More than 13 million people have increased the amount they are saving, following recent increases in interest rates.

Sainsbury's bank has revealed that 17.7 billion more a year is being put away - equivalent to an extra 107.66 a month per person.

Donald Jarvie, savings manager at Sainsbury's Bank commented: "Higher interest rates are clearly encouraging more people to start saving. Indeed, there are now around 50 savings accounts paying five per cent interest or more."

In the last 12 months the Bank of England has increased the base rate of interest in the UK by 1.25 per cent, leading many lenders to increase the interest that they pay to savers by a similar - and in some cases greater - amount.

Wales and the west of England has seen the biggest increase in those saving more - with 38 per cent of the residents of this region claiming to have increased the amount they are putting aside for a rainy day. Those in the north west have increased the amount they are putting away the least - with only one in five people (21 per cent) saying the increase in interest rates has seen them invest more.

Nationally, 42 per cent of those aged between 16 and 24 now say that they are saving more than they were a year ago. This represents the highest increase for any age group. 55-64 year olds are increasing their savings the least - with just 22 per cent of this demographic admitting to putting more away.

But consumers have been warned that, even with increased interest rates, not all accounts are as lucrative as they may seem.

"Savers need to be careful as around 40 per cent of [high paying savings accounts] rely on introductory bonuses. Others include restrictions such as limiting the number of withdrawals that can be made or only offering top rates to existing customers," cautioned Mr Jarvie.