Squeezed UK households tap into savings at record pace

BRITISH households withdrew money from their savings in May at a record pace, as a jump in interest rates pushed consumers away from credit, data from the Bank of England (BOE) suggested on Thursday (Jun 29).

Households withdrew a net £3.8 billion (S$6.5 billion) from savings – the biggest outflow on record – driven by withdrawals from bank accounts and offset only slightly by inflows into the government’s National Savings and Investment products.

The BOE data showed that unsecured lending to consumers rose by £1.14 billion in net terms last month, after a £1.513 billion increase in April. This marked the smallest net increase this year.

A Reuters poll of economists had pointed to net consumer credit lending of £1.5 billion in May.

The BOE said that British lenders approved 50,524 mortgages in May. This was up from a revised 49,020 in April, but down from around 66,000 in May last year, before the rise in borrowing costs began to weigh on the housing market. The Reuters poll had pointed to approvals of around 49,700 in May.

The value of net mortgage lending contracted in May by £92 million, following a £1.47 billion fall in April. This marked the first back-to-back falls in net mortgage lending since records began in 1997.

SEE ALSO

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Ashley Webb, an economist from consultancy Capital Economics, said: “Higher interest rates continued to weigh on bank lending in May, particularly in the housing market.”