Brits put £5.7bn in savings in May, figures out today showed.
Borrowing levels hit pre-pandemic average, with £800m in debt in May while savings rates rose as Base Rate hikes are passed on.
Laura Suter, head of personal finance at AJ Bell, comments on the latest Money and Credit data from the Bank of England: “Looking at the latest figures for how much debt we’re all taking on you might think the cost of living crunch is over. As a nation, both our borrowing and saving in May are sitting around pre-pandemic levels.
“In fact, the amount we all borrowed in May was lower than the average for the 12 months leading up to the pandemic. At £800m it is also significantly lower than April’s figure of £1.4bn. It still takes the total amount of debt we’ve taken on so far this year to £5.7bn – a not insignificant sum, but marginally lower than the same period in 2019 when we borrowed £5.8bn.
“Savings figures tell a similar picture, with the combined savings in bank accounts and NS&I adding up to £5.7bn, almost bang on the 12-month average leading up to the pandemic. May’s deposits are slightly below April’s – to the tune of £600m – as more households had to use their savings to meet rising bills.
“The reality is that these average figures hide a split nation, with some households able to stomach the rising price of food, petrol, energy and almost everything else, either by budgeting and cutting costs or because they have sufficient earnings to cover it. Those households are also still able to stash money away each month, and with investment markets rocky it’s likely some are parking it in cash rather than diving into markets.
“On the flip side, we have another section of the population who have run through their savings, made all the cutbacks they can and are now turning to debt to settle their bills each month. Budgeting can only take you so far if your income isn’t rising and all of your bills are.
“A bright spot for those who have been able to save money is that the Bank of England’s rate rises have boosted savings rates. In May average fixed-rate savings account rates rose by 16 basis points, up to 1.25%. The rates on offer for both one-year and two-year fixed rate bonds hit their highest in more than three years, with March 2019 being the last time they were higher.”