Britons are being warned that their savings are at an all-time low as interest rates plunge to new lows.
Interest rates have fallen to a “historic low,” prompting a SAVINGS warning for Britons. The Bank of England released the UK’s latest savings and mortgage numbers earlier this week, prompting this caution.
Savings in the UK fell from £9.8 million in June to £7.1 billion in July, according to the banking institution. At the same time, deposit interest rates continued to plummet to new lows never seen before. Individuals’ effective interest rates on new time deposits with banks have dropped two basis points to 0.29 percent.
Furthermore, effective rates on outstanding time deposits fell to 0.38 percent, while rates on sight deposits stayed unchanged at 0.10 percent.
The summer holiday season, according to Laura Suter, Head of Personal Finance at banking firm AJ Bell, has encouraged Britons to cut back on their healthy spending habits, which many had picked up during the pandemic and shutdown.
“As the kids got out of school and the summer vacation began, we all started spending more and saving less,” she explained.
“People saved less in July than in June, putting away £7.1 billion, a reduction of roughly £3 billion from the previous month.
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“However, it’s easy to see why individuals would rather spend their money than save it, given that deposit interest rates have fallen to yet another historic low.”
Despite this shift in purchasing habits, many consumers in the UK did not take up new consumer credit in July.
The effective rate on new personal loans remained low throughout the period, at 5.85 percent, although it was the highest since March 2020.
Despite this increase in spending, Ms Suter warns the public that the economy has not recovered to pre-Covid levels.
“Despite this increase in spending, consumers did not put additional money on their credit cards, and many people continued to pay off their debt,” she noted.
“Since the pandemic began last year, households have paid off significant quantities of credit card debt, but this began to change earlier this year as the lockdown relaxed and everyone ventured out and spent more.
“Net borrowing was nil in July, compared to an average of £1.2 billion per month in pre-pandemic periods, demonstrating that we haven’t.”Brinkwire Summary News”.