- Just over £20 billion put into cash savings in October
- Pre-Budget uncertainty likely to have led to shift to cash
- £14.4 billion deposited in easy-access accounts
- Net mortgage lending grew by almost £1 billion in October
- Impending stamp duty hikes likely to temporarily boost house movers in next four months
Laura Suter, director of personal finance at AJ Bell, comments on the latest Bank of England money and credit data:
“October saw a savings boom among Brits, with just over £20 billion put into cash savings by the nation in the month alone. This is a non-Covid record, marking the highest deposits outside of the pandemic. Even taking into account the Covid period, it’s the highest since December 2020, during the pandemic when people were in lockdown and had nowhere to spend their money.
“People are spreading their cash between different accounts, with a huge £14.4 billion being deposited in easy-access accounts – the highest amount for three and a half years. But a healthy £1.5 billion still flowed into ISA accounts, as people are more alert to the fact that they may face tax on their savings interest.
“Some of this boom in cash savings will be the continuing trend we’ve seen of people wanting to build up a cushion to protect their finances, or build up a pot to pay off a chunk of their mortgage when it comes up for renewal. But it’s likely that the uncertainty around the Budget and potential tax changes sparked nervousness among investors and savers, leading to the rush to cash. Investors who were nervous about the impact on markets of Rachel Reeves’ first Budget may have opted to sit it out in cash. At the same time, we saw nervousness around potential tax rises meant that some people realised gains on investments or took larger withdrawals from their pensions.
“Another factor may have been popular NS&I accounts reaching maturity. Close to a quarter of a million customers bought NS&I’s one-year Guaranteed Growth and Income Bonds in September last year, which will have now matured. While overall flows to NS&I were still positive in October, at £2.2 billion, it’s fair to assume that a decent proportion of these matured savings accounts will have been paid out to easy-access accounts and parked while people work out where to put their money next.
“The challenge for the nation now is to work out what to do with those cash levels. We know that cash is not a great place for long-term money, as inflation eats away at its spending power. So, savers need to think about whether to put their money into markets, keep it in cash as a tactical move, or just spend it now. Labour will be hoping for a lot of the reinvestment story, preferably back into UK assets, and not too much spending, which could spark another increase in inflation.”
Source: Bank of England
Mortgages:
“The property markets continued to pick up, with another increase in mortgage lending in October. Net lending grew by almost £1 billion in October, following a drop the previous month. And future months look rosier too, as mortgage approvals rose to their highest level in more than two years.
“After a sluggish summer filled with worries about the path for interest rates, it appears a couple of interest rate cuts by the Bank of England has been enough to spur on homeowners. A bigger rocket under the housing market is likely to be the impending changes to stamp duty that will make it more expensive to move house from April next year. The fact that homeowners will be facing thousands more in tax for moving house is going to be a big incentive to complete before the stamp duty hikes come into effect. It means we could see a flurry of sales in the next four months before a drop-off in April next year.”
