UK household savings* have continued to grow, increasing 3.93%, from £1.41 trillion at November 30 2021, to £1.47 trillion as of November 30 2022, shows new research from Bowmore Financial Planning.
Whilst the rate at which UK households are saving has slowed the data shows that on average, households have not yet had to eat into their savings to pay for the cost-of-living crisis.
The rate at which UK households top up their savings is slowing, with the £55.4bn added to accounts this year 44% less than the £98.2bn added to accounts in the previous year.
In the US, household bank deposits have fallen by over $800 billion to $10.2 trillion between March 31 and September 30 2022, according to data from the Federal Reserve**.
Bowmore Financial Planning says household savings may begin to level off, as the cost of inflation bites and mortgage payments increase. The Bank of England has announced the average monthly mortgage bill will increase from £750 to £1,000 in 2023, an indication household’s financial struggles will increase.
Jill Ellicott, Financial Planner at Bowmore Financial Planning explains that whilst many households will already have had to spend all their savings because of rising inflation and interest rates, bank balances, as a whole, are still healthy.
However, Jill warns that the longer higher inflation drags on the more households will have to spend all their savings. For example, the energy support scheme’s end in March 2023 may lead to more people needing to use their savings to pay energy bills.
Jill Ellicott suggests that those who do have healthy balances should consider switching bank accounts for a better interest rate. Savers are advised to compare their current bank’s interest rates against others, as some may have increased quicker.
Says Jill Ellicott: “Times are tough. Many households are already cutting costs where they can as they view spending savings as a last resort if things get too difficult.”
“However, it may not be long before most households are withdrawing savings to cope with the cost-of-living crisis. When this happens, we will see a rare drop in UK household savings.”
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