Savings levels dropped in July, to £7.1bn down from £9.8bn in June but credit card spending didn’t increase, with borrowing at zero.
Individuals repaid £1.4bn of mortgage debt – only the second time in 10 years this has happened.
Laura Suter, head of personal finance at AJ Bell,comments on the latest figures from the Bank of England on saving and mortgages:
“As the kids broke up from school and summer holidays began we all started spending more and saving less. People saved less in July than in June, with £7.1bn of money put away in the month, a nearly £3bn drop on the previous month. But it’s clear to see why people might decide to get out and spend their money instead of save it, as interest rates on deposits fell yet again to another historic low.
“Despite this rise in spending, people weren’t putting more money on their credit cards and many continued to pay down this debt. Since the start of the pandemic last year households have paid off large sums of their credit card debt but this started to turn around earlier this year as lockdown eased and everyone got out and spent more. In July net borrowing was zero, compared to an average borrowing figure of £1.2bn a month in pre-pandemic times, showing we’ve not entirely returned to our old spending ways.
“The nation is waiting to see if the housing market falls off a cliff after the end of the stamp duty holiday. July’s data suggests the market may be slowing, with £1.4bn of net repayments of mortgage debt in the month. This is something that has happened only one other time in the past decade: in April last year during the thick of the pandemic when the housing market was effectively closed. The amount we were all repaying on our mortgages stayed roughly the same as the past year, but the amount we borrowed dropped to £16.5bn – the lowest since June last year.
“However, while mortgage approvals for future purchases fell a bit in July, they are still above pre-pandemic averages – showing signs that the market may remain fairly buoyant. And with the interest rates on mortgage borrowing dropping again, it’s likely that record low rates could keep the market afloat yet.”