Britons withdraw record £4.6 billion savings in May

Britons withdrew a record net amount of £4.6 billion of savings from banks and building societies in May, according to the latest figures from the Bank of England.

It marks the biggest monthly withdrawal in 26 years, since records began in 1997, according to analysis by AJ Bell. 

There was a spike in withdrawals from easy-access savings accounts, where the money can often be taken out without a penalty.  In total, £14.7 billion was withdrawn from these accounts last month.

Savings raid: The total withdrawn from banks and building societies last month marks the biggest monthly withdrawal in 26 years, since records began in 1997

Many will have been taking out the money to help ends meet, given the increased cost of bills and food as well as rising mortgage rates. 

However, it seems that some of the cash was also redirected into fixed rate savings accounts, which pay higher interest, and Isas which are tax-free. 

A net £4.9 billion was paid in to fixed rate savings accounts, and a further £3.3 billion went into Isas, according to the Bank of England. 

Britons also paid £0.8 billion into the government savings bank NS&I. 

With inflation remaining stickier than expected at 8.7 per cent in the 12 months to May it is thought that some Britons are likely having to rely on their savings to cope with higher food and energy bills among other things.

Sarah Coles said: ‘We’re raiding our savings at a record rate. Some of this is some sensible juggling, as we move into fixed rate deals, competitive NS&I accounts and Isas. 

‘However, there’s a real risk that millions of people are being forced to erode their savings to make ends meet.

‘This was always a risk at this stage in the cost-of-living crisis, now that so many people have cut every cost they possibly can and are being forced to raid their emergency savings.

‘We know that those on above average incomes still have lockdown savings to call on, but if the spending squeeze goes on for much longer, these will be worn away entirely.’

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

Some of the cash is also likely being used by mortgage borrowers as they attempt to cope with far higher monthly costs thanks to rising interest rates. 

 Others may be seeking to overpay their mortgage while their rate remains low, to cut down the overall debt ahead of future rises. 

Britons repaid a net amount of £0.1 billion on their mortgages in May, the figures show, marking a small increase in repayments after three months of decreases.

Mortgage approvals for house purchases rose from 49,000 in April to 50,500 in May – although this is still below the March level.

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

‘People may be covering their own increased costs and also the bank of mum and dad could be raiding savings balances to help their children with mortgage pressures.’

Many mortgage borrowers will be yet to feel the pinch of higher rates until their existing fixed rate mortgage deal comes to an end. However, that is not stopping many from planning ahead and overpaying before their remortgage date.

Chris Sykes, technical director and senior adviser at mortgage broker, Private Finance said: ‘With the dramatic increase in many people’s monthly payments when remortgaging, we are seeing lots of clients withdrawing money from their savings and investments in order to overpay their mortgages.

‘This can be within their usual 10 per cent overpayment allowance or it can be with larger lump sums when refinancing.

‘This, along with additional withdrawals people are having to make due to the increased cost of living, means these grim figures are sadly no surprise.’

This post first appeared on Dailymail.co.uk