• Brits have saved £157bn during lockdown
• Over lockdown we’ve paid off almost £16bn in debt
• Mortgage approvals are a third lower than the worst month of the financial crisis
Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the latest savings and debt figures from the Bank of England:
“So far as a nation we’ve saved £157bn during lockdown, as our outgoings have been slashed and we’ve decided to build up our rainy-day funds for the rocky economic times ahead. This trend continued in May with £52bn squirreled away by people into savings accounts.
“At the same time we used spare cash to pay off debts, with another £4.6bn of debt repaid by individuals, including £1.8bn of credit card borrowing. This means over lockdown we’ve paid off almost £16bn in debt in total. While May’s figures are a drop from the £7.4bn of consumer credit paid off in April, it shows that people are still focusing on getting their finances in better shape and being recession-ready.
“Whether it’s the cost of the annual summer holiday or the hundreds usually spent each month on commuting or childcare costs, many households are finding it easy to save cash at the moment. As lockdown eases and we can all get out a bit more to spend in shops, bars, restaurants and trips away we’ll see the amount we’re all saving fall.
“One blow for these savers is that interest rates fell again in May, as banks are inundated with savings cash and don’t need to offer attractive rates to draw in customers. This means the average easy-access account is now paying 0.29% - marking a new record low since 2016.
“However, these figures mask the divide in the UK, with some people who’ve lost their jobs or furloughed struggling financially and taking on more debt. The only saving grace for those people is that the cost of debt is falling, with the average cost of new personal loans having fallen from 7% at the start of the year to 5.1% in May – the lowest on record since the data started in 2016.
“The figures on mortgage lending paint a rocky picture ahead for the housing market, as approvals for new mortgages dropped almost 90% below February. The approvals are now a third of what they were at their lowest point in the financial crisis and show that the housing market may not have the fruitful pipeline some have been predicting. Some lenders have tightened up their lending criteria or minimum deposit requirements, for fear of a drop in house prices, while at the same time some households may feel their finances are too precarious to commit to a house move at the moment.”
