Savers withdrew a staggering £6.2billion from National Savings & Investments accounts in November after it slashed interest rates on some of its most popular products.
Deposits with the Treasury-backed bank were ‘historically weak’ in November, the Bank of England said as it unveiled its latest money and credit report.
The exodus from NS&I comes as UK households saved more with banks and building societies during the month – a total of £17.6billion, up 38 per cent from the £12.7billion saved in October.
A woman from West Scotland and a woman in Barnet have each won £1million in January’s Premium Bonds prize draw (see below)
NS&I delivered a crushing blow to savers in October last year when it announced deep cuts to a number of accounts, which were then introduced at the end of November.
Some savers went from earning a market-leading rate of 1.15 per cent interest each month to just 0.01 per cent, while holders of Britain’s best-loved savings product Premium Bonds now have less of a chance of winning a prize.
NS&I slashed rates after attracting big sums of money from interest-starved savers since the pandemic struck, overshooting its annual target. But now it looks like the Treasury-backed bank may be finding itself below its £35billion funding target for the year.
NS&I saw inflows of £38.3billion in the first six months of the financial year, from April to the end of September.
But after withdrawals of £500million in October and of £6.2billion in November, it is left with around £31.6billion in the tank – although it still has until the end of March to make good any shortfall.
Laith Khalaf, financial analyst at AJ Bell, said: ‘The scale of the withdrawals does raise the question whether NS&I has overegged the pudding with its rate cuts.
‘It’s never an easy job deciding what rate will attract the right amount of money, but that’s been made even harder by the distortive effect of the pandemic on people’s savings habits.’
Households’ deposits increased by £17.6 billion in November, up from £12.7billion in October
Britain has seen a growing army of ‘accidental’ savers who have found themselves with extra cash during the pandemic.
Meanwhile, borrowers have continued to repay back their loans and credit cards at an ever faster speed than before.
The Bank of England reported today that net debt repayments totalled £1.5billion in November, up from £689million in October.
Howard Archer, chief economist at the EY Item Club, said: ‘This is likely to have been the consequence of a lack of opportunity to spend due to the restrictions on activity as well as heightened consumer caution amid Covid-19’s impact on the economy.’
UK mortgage approvals hit 13-year high
The BoE’s credit report also shows that mortgages handed out to homebuyers increased further to 105,000 in November from 98,330 in October, hitting its highest level since August 2007.
Households borrowed an additional £5.7billion in November, up significantly from net borrowing of £4.5billion in October.
The Bank said the continued strength in mortgage borrowing follows a large number of approvals for house purchase over recent months.
UK mortgage approvals increased further to 105,000 in November from 98,330 in October
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