Britons have been dipping into their piggy banks as the cost of living crisis puts the squeeze on their incomes.
Withdrawals
A bumper £4.6 billion in savings from banks and building societies was withdrawn in May, with a boom in money being taken from interest-paying easy access accounts which went up £11.4 billion from £5.4 billion.
There was also £3.3 billion withdrawn from easy access accounts paying no interest, while £4.9 billion went into fixed rate accounts, and £3.3 billion went into ISAs.
According to the Bank of England, the combined net flow of both household deposits with banks and building societies and National Savings and Investment (NS&I) accounts amounted to -£3.8 billion in May, which was a significant fall from £5.3 billion in April.
Sarah Coles, head of personal finance, Hargreaves Lansdown, said there was a marked trend towards cash being withdrawn from savings by struggling consumers.
Coles said: “We’re raiding our savings at a record rate, with £4.6 billion pulled from banks and building societies in May – driven by an incredible £14.7 withdrawn from easy access savings. Some of this is some sensible juggling, as we move into fixed rate deals, competitive NS&I accounts and ISAs.”
She added: “However, there’s a real risk that millions of people are being forced to erode their savings to make ends meet. Meanwhile, there was a small bump in mortgage approvals for new purchases in May, as rates started to rise, and potential buyers rushed to get their loan in place before things got even worse.”
Strategic money movements
Although some of the withdrawals from easy-access accounts will have been by people making strategic transfers of money to higher-paying savings accounts or tax-exempt vehicles like cash ISAs the overall picture is one of money haemorrhaging away from savings accounts. Some £3.8 billion was withdrawn in May.
During the Covid pandemic when businesses and households alike were forced into the cold storage of lockdown and there was much less on which to spend money, some people were able to pad out their savings nest eggs.
But now as the cost of living crisis drags on and bills keep on landing with unavoidable regularity on the nation’s doormats we can see a change in people’s financial behaviour. People have cut their spending to the bone and now are raiding their piggy banks for any spare change they can find.
