AJ Bell press comment – 29 November 2022
- Record £11.3 billion of money saved into fixed-term accounts in October
- Average rate on two-year fixed-rate bonds hit 3.55% in October, the highest since 2009
- Three-year bonds hit 13-year high
- Increase in borrowing to £800 million in October
- Drop of nearly £2 billion on net mortgage lending in October – from £5.9 billion to £4 billion
Laura Suter, head of personal finance at AJ Bell, comments on the latest savings and borrowing data from the Bank of England:
“People made the most of a leap in savings rates and shifted their money into fixed-term accounts in their droves in October – marking the highest savings on record. A huge £11.3 billion of money was saved into fixed-term accounts as rates leapt up following the mini-Budget and fierce competition in the savings market – four times as much as the previous month.
“Some of this was money shifted from easy-access accounts, as people pounced on better savings rates for locking money away for longer. The average rate on two-year fixed-rate bonds hit 3.55% in October, the highest since 2009, while three-year bonds also hit a 13-year high.
“Savings in NS&I fell out of favour, as savers found better rates elsewhere and the Government-backed provider couldn’t keep up with the savings war. Savers put £200 million in Premium Bonds and NS&I’s other accounts, a quarter of the amount they saved in September.
“On the flip side, there was an increase in the amount we all borrowed in October, up to £800 million. This figure will keep on climbing as the cost of Christmas starts to hit people’s credit cards and overdrafts. While many people will be making cutbacks this year over the festive period, there will still be lots of money spent that people don’t have.
“Interest rates on debt have moved slowly up, until October when they leapt higher. The average interest charged on personal loans is now its highest for four years, at 7.23%, while credit card interest rose again to 19.31%.
“The huge hike in mortgage rates following the mini-Budget inevitably had an impact on the amount of borrowing in October. There was a drop of almost £2 billion in net lending in October, with the outlook for future borrowing also falling. Rates have since fallen back slightly, meaning we might see a pick-up in activity in the final months of the year. However, for many the rates are too high for them to get on the property ladder or move house, while worries about house price falls will be putting others off moving house.”
