NS&I back in favour and mortgage market hits seven-year low

by | Mar 29, 2023

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Laura Suter, head of personal finance at AJ Bell

Laura Suter, head of personal finance at AJ Bell, comments on the Bank of England’s Money and Credit figures for February.

She said: “Mortgage lending hit its lowest levels in seven years, if you disregard Covid times, as the housing market shows the first signs of an incoming slump. High mortgage rates, worries about house price falls and a crunch on affordability all lead to the lowest levels of lending since April 2016, again once you omit the anomalous Covid period.

“The outlook is slightly more optimistic though, with approvals for future lending increasing for the first time since August last year. Mortgage rates have dropped considerably since last year, meaning that some homebuyers who had delayed their homebuying plans have put them back on the table.

“Savers are continuing to vote with their feet and shift their money to better paying accounts. High-street banks have been criticised for not raising rates fast enough, but savers have got wise to this practice and are moving their money in droves. Fixed-rate accounts continued to be popular, as people lock in higher rates, with £6.8 billion of money deposited in these accounts. February was the fifth consecutive month where people moved their money out of easy-access accounts and into fixed-rate ones. As many signal that we’re nearing peak interest rates it’s a good time for savers to snap up higher rates now, before the market plateaus when the Bank of England ends its rate-hiking cycle.


“NS&I was also back in favour, after increasing interest rates to draw in more money. Savers handed over a whopping £2 billion to the government-backed provider in February, after it raised rates on many of its accounts and boosted the Premium Bond prize fund yet again. This is the highest inflows NS&I has seen since September 2020, when savers flocked to the market-leading accounts during the pandemic.

“It’s a sharp turnaround for NS&I, which has seen outflows in two of the past four months. The £2 billion of inflows seen in February amounts to more than the combined total for the past five months. As savers have got savvier, more have shifted their money away from the government-backed provider to get better rates elsewhere. If these inflows continue savers could face rates being slashed again, if the provider nears its target fundraising set by the government.”

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