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Home Banking Bank of England: Savings soar again – but it’s only half the picture 

Bank of England: Savings soar again – but it’s only half the picture 

by admin
Susannah Streeter
  • We paid £6 billion into banks and building societies in February – the fifth consecutive monthly rise.
  • This was driven by £3.5 billion paid into interest-paying easy access accounts – while the amount paid into fixed accounts rose just £0.1 billion.
  • The average rate on a fixed account fell 7 basis points to 4.46% and the average easy access rate rose 4 basis points to 2.11%.
  • Mortgage approvals for house purchases rose from 56,100 in January to 60,400 in February – the highest since September 2022.
  • The snapshot adds to hopes that recession is in the rear-view mirror as more confidence appears to return. However, what’s not in these figures is just as important as what is.

The Bank of England reported on effective interest rates for February: Effective interest rates – February 2024 | Bank of England

It also issued its money and credit report for February: Money and Credit – February 2024 | Bank of England

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

The economy

This snapshot gives further hope that the pernicious effects of high interest rates on the economy are beginning to lighten, with mortgage approvals being sent to a 17-month high in February. Expectations have shifted higher again that the recession is in the rear-view mirror, given that homebuyers clearly feel more confident, which is likely to play out in spending elsewhere in the economy. The flow of money into instant access deposits continues, indicating less willingness to save for the longer-term and a keenness to have funds on tap to splash the cash.

However, although the light at the end of the tunnel of painfully high borrowing costs is shining that bit brighter, there is still a dark space to crawl through before companies and consumers feel significantly more financially secure. So growth is likely to remain highly sluggish in the months to come, with caution set to reign until interest rates start to be cut in the second half of the year.”

Mark Hicks, head of Active Savings, Hargreaves Lansdown:


“Easy access savings accounts and cash ISAs dominated the market in February. The appeal is obvious. They’re offering some of the best rates on the market, and savers like having the money to hand in case they need it. However, while easy access is the most sensible home for your emergency fund, if you don’t need the money for a period, it’s well worth considering a fixed rate savings account.

One-year fixed term deposits are also offering great rates at the moment. They’ve had the biggest rate resurgence in recent weeks while the savings market has been reconsidering how long we’ll have to wait for the Bank of England to cut rates. Not only that, but they lock in the rate now, so you’ll still be getting a strong return even after those rate cuts materialise.

The rates on longer-term fixed deals have dropped a little, to reflect the fact that the Bank is still expected to cut rates in the second half of this year. However, if you don’t need the money for 3-5 years, and lock in a rate that’s still within shouting distance of 5%, if rates fall as expected, your deal is going to look increasingly impressive with each passing month.”

Sarah Coles, head of personal finance, Hargreaves Lansdown:

Household finances

“The Bank of England figures only give us half the picture. The half on show looks increasingly attractive, as the sun shines on the savings and mortgage market, but the other half of the picture is quietly being shredded somewhere out of the frame.

The squeeze is easing for those on average incomes, who saw the biggest boost from the two NI cuts and are enjoying lower energy bills and the easing of inflation. Those on higher incomes aren’t benefiting quite so much from the tax cuts, but they always had more wiggle room, and the HL Savings & Resilience Barometer shows they’re building up a big cash cushion. This is why we’re seeing billions flood into the savings market.

These higher earners are also increasingly prepared to return to the property market. In February we borrowed another £1.5 billion in mortgages, which is the most since January 2023. Meanwhile, mortgage approvals for house purchases – which is a strong indication of demand in the coming months – rose from 56,100 in January to 60,400 in February. This is the highest since September 2022. The strength in the market is reflected in Zoopla figures last week showing property sales were up 9% in a year.

Unfortunately, at the same time, the squeeze hasn’t eased for those on lower incomes. They’re paying the price of frozen income tax thresholds, without getting the same benefit from the cut in the NI rate. They had far fewer costs to cut in the first place and the HL Savings & Resilience Barometer shows they have been running on empty for months. They’ve spent their way through any savings, and are running up serious arrears. However, because they were unlikely to be in the market for property in the first place, and they may not qualify for credit, the plight of lower earners is hidden in missed bills and the endless struggle to make ends meet rather than on show in this data.”

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