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Brits increase savings and cut borrowing, says Bank of England

Brits increase savings and cut borrowing, says Bank of England
Emma Lunn
Written By:
Emma Lunn

The Bank of England Money and Credit report shows that savers paid £5.4bn into banks and building societies in November.

For the first time since May 2022, the net flow was into, not out of, easy access savings accounts. Savers paid in £3.3bn into these accounts, and £2.5bn into fixed rate accounts.

Brits also paid £0.6bn into NS&I. So in total, it meant we paid £6bn into savings accounts. This is slightly over the average for the previous six months (£4.2bn) but down from October’s level of £7.4bn.

The latest Money and Credit report also shows that the average interest rate on a fixed saving account fell 27 basis points to 4.8% and the average easy access rate was stable at 2.03% in December 2023.

Mark Hicks, head of active savings at Hargreaves Lansdown, said: “The data reveals that easy access [savings] is flavour of the month, which owes a great deal to the fact that fixed rate savings deals have been falling in recent weeks, but easy access rates have stayed more robust.

“With little difference between easy access accounts and fixed term deposits, it’s not surprising to see the trend of money flowing into these for the first time since May 2022.

“Cash is clearly still offering really attractive returns, so I expect savings to keep flowing in over the coming months. There are high hopes for a bumper cash ISA season in 2024.”

Savings up, borrowing down

The bank’s latest report also shows a fall in consumer borrowing of £1.2bn in December, while the effective interest rate on newly drawn mortgages fell by sixbasis points to 5.28%.

But despite the encouraging figures, debt charity StepChange is warning that any apparent green shoots of recovery belie the fact that millions of people are still struggling to keep up and are at risk of falling into problem debt.

Polling carried out by the charity today found that 40% of people, about 22 million people, are struggling to keep up with bills and credit commitments.

Richard Lane, chief client officer at StepChange, said: “While it’s encouraging to see consumer borrowing fall – particularly in December when Christmas spending is at its peak – the fact remains there are still millions of people struggling to meet the most essential of financial commitments and they are turning to borrowing as a result.

“Our research has found that one in eight people has borrowed to keep up with essential payments in the past 12 months, and with everyday costs like energy bills and groceries still soaring, we can expect to see more and more people turn to borrowing to make ends meet.

“The Chancellor has an opportunity in the Spring Budget on the 6 March to extend targeted support for low income households whose financial resilience has been eroded by two years of sky high prices across the board. In an election year, tackling such widespread problem debt and improving households’ financial security should be at the top of the current and future government’s agenda.”