Why public fails to shop around for best deals.
The Financial Services Authority estimates that families could save up to pounds 711 a year simply by applying the same discrimination when taking out a mortgage, current account, or credit card as they do when buying a washing machine or television.
But the regulator claims that just a third of consumers shop around for the best prices on financial products, compared with two thirds who compare costs when buying other items such as electrical goods, and 39 per cent think there is little difference between the charges and costs of different companies.
FSA chairman Sir Howard Davies said: 'When people buy financial services products, they appear to leave their normal critical faculties behind.
'This is a serious market failure.
'Because people are not shopping around, the market is not properly competitive.
'If people simply used the same critical faculties buying financial products that they do when they buy a washing machine, they could save themselves pounds 700.'
In a report, Losing Interest? How Much Consumers Can Save By Shopping Around, the FSA estimates that people could save an average of pounds 26 a year by taking out the most competitive current account, rising to pounds 137 for choosing a credit card with the lowest interest rate, and pounds 230 on a mortgage.
It added that those who stood to save the most were the youngest and oldest consumers, and those on low incomes.
According to the research, a couple aged under 35 with no children, who had a current account, savings account, mortgage, personal loan and credit card debt, could save pounds 711 a year by shopping around for the best rates.
A retired couple with a current account, savings account and an annuity would save up to pounds 340 a year, while a family with children who had a current account, savings account and mortgage could make annual savings of pounds 284.
The regulator said the problem of not shopping around was made worse by the fact that 80 per cent of people go to tied advisers, which only sell products for one provider, so they think they are getting a choice when they are not.
The research found that the stereotypical view that the Scots kept the tightest control of their money was true, with just a 3 per cent difference between the average interest rate paid by those north of the border and the best rates available, followed by those in Yorkshire with a 3.4 per cent difference.
Londoners were worst at shopping around, paying an average rate of 3.75 per cent above the best rate available, followed by those in the South-west at 3.5 per cent.
To help consumers get the best deal, the FSA publishes comparative tables on its website on a range of financial products and their charges, as well as publishing a consumer guide, It Pays To Shop Around, which is available from most high street post offices.
It has also made it compulsory for insurance companies to tell people converting a personal pension into an annuity that they can shop around to get the best rate available.
The FSA's website is www.fsa.gov.uk.
The report was based on research carried out by NOP which questioned 60,000 households about financial products and the Office of National Statistics which questioned 2,000 people during October 2001.
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|Publication:||The Birmingham Post (England)|
|Date:||Oct 30, 2002|
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