NS&I anticipates a £129 million withdrawal as savings rates remain ‘uninspiring’ – act now!
As the economy reopens and constrained consumers move to a spending mindset, saving habits may be impacted in the following months. Hargreaves Lansdown (HL) just published its latest “savings state of play,” which revealed some evidence for this.
Many people have built up savings accounts in the last year or so, as the coronavirus basically shut down the economy and reduced people’s spending options. However, recent evidence suggests that as the economy reopens, savers may be eager to spend, putting pressure on savings organizations like NS&I.
HL spoke with Sarah Coles, a personal finance consultant, about how the savings market has fared recently.
“We may have become a nation of savers while we were cooped up at home, but our newfound passion for putting money away has been put to the test as life has opened up and our savings have begun to burn a hole in our pockets,” Ms Coles said.
“Our goal to establishing cash cushions in our current accounts, in particular, has been affected by spending.
“The rate of saving slowed in May, with roughly £7 billion added to accounts compared to £16.5 billion in the six months leading up to April 2021.
“In particular, the amount of money deposited into no-interest accounts, which are often current accounts, decreased dramatically.
“We haven’t yet spent more than we put into these accounts: we paid in £834 million more than we spent a month before, but that’s down from £6.73 billion.
“The ease with which money goes in and out of these accounts highlights why a current account is an awful place to keep an emergency savings fund.
“You will earn little or no interest in the great majority of circumstances, but even if your bank gives a fair rate for cash holdings, it’s far too simple to spend this money on things that don’t even meet the most generous definition of emergencies.”
Ms Coles then moved on to look at the current savings rates.
“Overall, savings rates remain uninspired, with the average easy access rate at 0.06 percent and the average for 12-month fixed rates at 0.24 percent,” she concluded.
“However, in recent weeks, the most competitive accounts available from smaller or newer banks have crept up, and the top of the easy access has now crept up to 0.50.”Brinkwire Summary News.”