UK household bank and building society savings grew at the slowest pace since records began in the 12 months to September as savers poured money into NS&I bonds instead, according to the Bank of England.
The Bank’s “household M4” measure - which includes cash and money held in bank and building society accounts with a maturity of five years or less - ticked up by only 0.8% in the last year, the lowest rate since the Bank started tracking data in 1998, after household savings fell by £31.5 billion during September.
Much of the change was due to savers putting money into NS&I products, which are not counted in the “household M4 “ measure due to their longer maturity. A total of £7.7 billion was poured into NS&I instruments during September, the most since August 2020. The returns on NS&I bonds have soared as the Bank of England repeatedly hiked interest rates to their current level of 5.25%.
The slow growth comes as inflation eats away at the value of savings, with prices rising by 6.7% over the course of the year.
Gina Silvester, Chief Operating Officer at wealth app Chip said: “As the cost-of-living crisis lingers on, bills have rocketed and mortgage rates have jumped, household income has been stretched from all angles, so it’s understandable that saving deposits have dropped off and people are dipping into their savings.
“Although many will understandably be focussing on using their hard-earned cash to cover basic monthly costs, I’d encourage those who can to squirrel away some money into savings where possible and make sure that they’re making this work as hard as possible for them.”
The Bank also revealed today that mortgage approvals continued to decline in September to just 43,300, close to the lows reached in the aftermath of the mini-Budget.
That came as the average interest rate paid on newly drawn mortgages rose by 0.19 percentage points to 5.01%.
But with most mortgage-holders still on fixed-rate deals agreed at a time when interest rates were much lower, the average interest rate on all outstanding mortgages was much lower, at 3.14%.
The Bank of England will make its next interest rates decision on Thursday. It is widely expected to keep rates at 5.25%.
