Savings 'postcode lottery' claim

Interest rates were different in various areas of the country

Customers have faced varying rates of return on their savings depending on where they lived in the UK, an academic has claimed.

Banks and building societies based in Northern Ireland, Yorkshire and the east and north of England offered lower returns between 1992 and 2006.

Better deals were available in the North East and South West of England and the Midlands.

John Ashton, of the University of East Anglia (UEA), assessed 1,225 accounts.

"The findings indicate that geography is only one of many factors which influence interest rates set by banks," said Dr Ashton, of the Economic and Social Research Council Centre for Competition Policy at UEA.

Account access

The academic, whose research was published in the Applied Economics Letters journal, points out that many of these financial institutions had different business models.

Using data from financial information service Moneyfacts, he analysed instant access and notice deposit accounts from 167 providers.

Most providers offer the same interest rates for customers across the UK, and Dr Ashton said that internet and telephone-based accounts offered above-average rates between 1992 and 2006.

But he told the BBC News website that a "substantial minority" of savers were not comfortable dealing with financial services over the internet, or did not have online access, and still wanted to use a local branch.

Many of these people would not travel to branches outside their home postcode district and had faced different rates of return, depending on where they lived.

Competition

He said that regionally-based banks or building societies - which had 75% of branches in one region - had different competition considerations and funding models from the big institutions.

"Regionally-based building societies and banks have been far more reliant on deposits to fund other aspects of their banking business, such as loan provision, than nationally-based banks, which have had greater access to money market funds until recently," he said.

"While larger national banks compete with each other, they are less likely to compete directly with smaller regional banks and building societies."

The banking crisis - which led to the merger of a number of smaller building societies - reached its peak after the sample period of Dr Ashton's study.

But he claimed that the regional variations in interest rates would not change dramatically as a result.

"There has been a lot of volatility over the last year, but we would not expect the savings market to have changed significantly, bearing in mind it was consistent over a long period of time before that," he said, advising consumers to shop around for savings accounts.