New record high for money deposited into ISAs, according to official figures
Households across the UK have deposited an additional £11.7bn into ISAs in the past month, marking the highest amount since records began in April 1999, the Bank of England has reported.
This surge in savings comes amid a 16-year high in interest rates, which have remained steady at 5.25% since August. However, the Bank has noted that the effective interest rate – the actual interest paid – on new deposits with banks and building societies has increased by 3 basis points to 4.40% in April.
Additionally, the figures released on Friday reveal that the effective interest rate on newly drawn mortgages was 4.74%. Mortgage approvals saw a slight decline to 61,100 in April from 61,300 in March, which had been the highest level since September 2022, indicating increased activity in the housing market.
This dip in mortgage approvals coincided with an increase in mortgage rates in April, as some lenders pushed back their expectations for the Bank’s next interest rate cut. The number of remortgaging approvals also decreased to 29,900 in April from 33,500 in March.
However, there was a rise in net mortgage borrowing for the month, with the Bank reporting a net mortgage debt of £2.4bn in April, up from £0.5bn in March.
Meanwhile, consumer credit borrowing decreased from £1.4bn to £0.7bn in April, as households spent less on credit cards.
Inflation has also dropped to 2.3% in April, the lowest level in nearly three years. Karim Haji, KPMG’s head of financial services, commented on the latest figures, stating that “many households are still feeling unable to stretch themselves.”
He added that reports of increased default rates on credit cards and unsecured lending suggest that lending markets still have some way to go before normalizing. Haji also cautioned lenders to be mindful of customers’ financial positions when considering borrowing, as the cost of borrowing shows no signs of coming down in the near future.
Mark Harris, chief executive of mortgage broker SPF Private Clients, noted that mortgage approvals for new purchases remained consistent with the previous month, possibly due to mortgage rates edging upwards, which may have raised concerns around affordability and confidence.
In related news, separate figures released by Nationwide on Friday showed a 0.4% month-on-month increase in house prices in May. The building society’s chief economist, Robert Gardner, stated that the market appears to be displaying “signs of resilience in the face of ongoing affordability pressures.”
