Britons withdraw record £4.6 billion savings in May

The British withdrew a record £4.6bn in savings from banks and building societies in May, according to the latest figures from the Bank of England.

According to an analysis by AJ Bell, it is the largest monthly withdrawal in 26 years since records began in 1997.

There was a peak in withdrawals from low-threshold savings accounts, where money can often be withdrawn without penalty. A total of £14.7 billion was debited from these accounts last month.

Many will have taken out the money to make ends meet given the increased cost of bills and food and rising mortgage rates.

However, it appears that some of the money has also been funneled into fixed-rate savings accounts, which pay higher interest, and ISAs, which are tax-free.

A net £4.9bn was deposited into fixed rate savings accounts, with a further £3.3bn to Isas, according to the Bank of England.

The British also deposited £0.8bn in the state savings bank NS&I.

With inflation remaining more stubborn than expected at 8.7% in the 12 months to May, it is believed that some Britons will likely have to rely on their savings to pay for higher food and energy bills, among other things.

Sarah Coles said: ‘We are looting our savings at a record pace. Part of this is juggling wisely as we move into flat rate deals, competitive NS&I accounts and ISAs.

“However, there is a real risk that millions of people will be forced to drain their savings to make ends meet.

“This has always been a risk at this stage of the cost-of-living crisis, when so many people have cut all possible costs and are forced to plunder their savings.

“We know that above-average incomes can still rely on the savings of the lockdown, but if the tightness lasts much longer, that will have completely worn away.”

According to the latest figures from the Bank of England, the British withdrew a record £4.6bn in savings from banks and building societies in May.

Some of the money is also likely to be used by mortgage borrowers trying to cope with much higher monthly costs thanks to rising interest rates.

Others may try to overpay their mortgages while keeping interest rates low to reduce overall debt in anticipation of future increases.

Britons paid off a net £0.1bn on their mortgages in May, the figures show, marking a small increase in repayments after three months of declines.

Mortgages for home purchases rose from 49,000 in April to 50,500 in May – though still below March levels.

Andrew Hagger, a personal finance expert at MoneyComms, says: ‘I think quite a bit will be used to cover higher costs, particularly mortgage repayments where some people have to find hundreds of pounds extra every month.

“People might be covering their own higher costs and also mom and dad’s bank could be looting savings to help their kids with mortgage pressure.”

Many mortgage borrowers will have yet to feel the pinch of higher rates until their existing fixed-rate mortgage agreement expires. However, that doesn’t stop many from planning ahead and overpaying before their remortgage date.

Chris Sykes, technical director and senior advisor at mortgage brokerage, Private Finance said: “With the dramatic rise in many people’s monthly payments when refinancing a mortgage, we are seeing many customers withdraw money from their savings and investments to refinance their mortgages. much to pay.

This could be within their usual 10 percent overpayment fee or it could be with larger lump sums on refinancing.

“This, along with extra withdrawals people are having to make because of the higher cost of living, means these grim numbers are unfortunately no surprise.”