Bank of England figures reveal a large increase in household deposits.
Commenting on the Bank of England’s (BoE) latest Money and Credit statistical release, Becky O’Connor, Head of Pensions and Savings, interactive investor, says: “Hot on the heels of last week’s Office for Budget Responsibility forecast of a second peak in the household saving ratio in late 2020/ early 2021, today we see a large increase in household deposits, according to the BoE. It seems that in these tough times when we can’t say ‘yes’ to social opportunities, many Brits are instead embracing a ‘YES’ approach to saving - a Year of Extreme Saving, to coin a new phrase.
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Myron Jobson, Personal Finance Campaigner, interactive investor, adds:
“It is clear that the NS&I’s star has fallen somewhat in the eyes of savers, as the BoE specifically highlights less investment in NS&I accounts as one of the key reasons behind the largest uptick in household deposits since May as rates have dwindled.”
“The increase in deposits also reflects the persistence of the savings habit many Brits have inadvertently picked up as the coronavirus restrictions has nullified the cost of eating out, leisure and, for those working from home, the cost of travelling to and from the office.”
Myron Jobson adds: “No surprise to see that interest rates paid on deposits waned further in October – with the exception of interest paid on individuals’ new time deposits which increased. Put simply, saving rates are bad, very bad at present. The persistence of low savings rates serves to dissuade people from doing the financially prudent exercise of squirrelling away cash.
“Savers have seen rates cut back to the bare bone since the onset of the pandemic to as low as a pitiful 0.01%, adding just 10p on an initial deposit of £1,000 in the first year where interest is applied annually.
“Whispers of the base rate falling to zero or going negative continue to do the rounds. The have so far failed to materialise but are not beyond the realms of possibility. What this would actually look like for savers remains to be seen, but the prospect of being charged to deposit cash into a savings account is likely to have huge ramifications on the nation’s savings habits.”
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