- We paid £4.2 billion into cash ISAs in August – taking the total so far this tax year to £27.9 billion.
- Deposits in banks and building societies rose £7.3 billion in August. We paid £4.4 billion into easy access accounts paying interest and £1.8 billion into easy access accounts paying no interest. However, we withdrew £0.6 billion from fixed rate savings.
- The average rate on a fixed account fell to 4.37% and the average easy access rate stuck at 2.14%.
- Mortgage approvals for house purchases rose to 64,900 – the highest since August 2022.
- Approvals for remortgaging increased from 25,200 to 27,200 – after falling for five months.
- Net consumer borrowing rose £1.3 billion – driven mainly by loans and car finance.
The Bank of England reported on effective interest rates for August: Effective interest rates – August 2024 | Bank of England
It also issued its Money and Credit report for August: Money and Credit – August 2024 | Bank of England
Savings
Mark Hicks, head of Active Savings, Hargreaves Lansdown:
“Easy access accounts retained their lustre in August, as these rates held relatively firm, while fixed rates fell slightly in the wake of the Bank of England rate cut. However, we know the pendulum has swung since then, and fixed rate deals are becoming the new flavour of the month.
Active Savings clients have increasingly decided it’s time to lock in rates while they can. They’re prepared to forego slightly higher easy access rates for the comfort of knowing that they’ll be sitting pretty on a rate of around 4.5%, while the Bank of England is expected to keep cutting in the coming years.
Cash ISAs continued to draw billions of pounds of cash – long after the traditional cash ISA season was over. With rates still relatively high and more people moving into higher tax brackets, there’s a bigger chance they’ll be hit with a tax bill on their savings. All the talk about the tax pain looming in the Budget has prompted them to prioritise keeping tax to a minimum on their savings. This has kept cash ISAs at the top of the to-do list of HL clients even in September, which is likely to ring true across the market.”
Mortgages
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“The rate cut didn’t spark immediate overnight drops in mortgage rates, in fact the Bank of England figures show the average deal actually rose during the month. However, the fact the Bank had started to cut rates at long last was enough to light the fire of hope in buyers. It inspired another bumper month for mortgage approvals, which we know from the Nationwide figures, helped push prices up in September to just 2% shy of their post-pandemic peak.
Since the cut, mortgage rates have inched down. At the end of last month, a two-year fix cost an average of 5.57%, according to Moneyfacts, whereas now it’s 5.4%. It’s not a huge move, but this steady decline is starting to add up. If you go back a year it was 6.48%.
For some people, mortgages have hit a level that has inspired a remortgage. It’s one reason why approvals for remortgaging also increased (although the figures don’t capture the whole market). There’s every chance that people have been putting off remortgaging. It’s easy to understand why. The HL Savings & Resilience Barometer shows that those who have already remortgaged have an average of just £315 left at the end of the month – compared to £401 overall, and £410 among mortgage holders who haven’t yet had to remortgage. They’ll be keen to do whatever they can to create a bit more space in their monthly budgets during the length of the fix.
However, if you’re waiting to see what’s going to happen next before remortgaging, you need to understand the potential costs. If you’re on a standard variable rate, the small gain from waiting will be swiftly wiped out from the extra payments in the interim. Likewise on a tracker deal, there are no guarantees you’ll save money, and you could end up paying much more.”
