Households withdrew £4.6bn from UK banks and building societies in May, according to the latest money and credit report from the Bank of England.
This represented the highest level of household withdrawals since records began in 1997.
The net withdrawal figure of £4.6bn compared to net deposits of £3.7bn in April.
Commenting on the figure, Quilter’s mortgage and financial planning expert Charlotte Nixon said it was problematic to see that people have been “raiding their savings” during the month.
“These scary figures show just what an impact the cost of living is having on people’s finances,” she said.
Nixon noted there have been calls for banks to increase the interest rates paid on their saving accounts, which have not kept pace with the increases banks and building societies have made on mortgage repayments.
“However, bank executives have rebuffed this request saying that if they were to do this then mortgage rates would need to get pushed even higher for them to still achieve their margins,” she added.
Yesterday, the Financial Conduct Authority said that it will require the largest banks and building societies to explain the pace and extent of how they pass through base rate changes to savers.
In Nixon’s view, the argument that raising saving rates would fuel higher mortgage rates was “short-sighted”.
This was because it is not helping to incentivise people to save when times are tough.
“With people’s incomes stretched they want to be getting a decent return on savings if they can even afford to save at all,” Nixon added.
Mortgages
Elsewhere, today’s money and credit statistics showed that net mortgage approvals for house purchases increased from 49,000 in April to 50,500 in May.
Likewise, approvals for remortgaging saw a rise from 32,500 to 33,600 during the same period.
However, Nixon noted that these figures “now look very out of date” given the turmoil the mortgage market has experienced this month.
“They paint a much rosier picture than the one we currently are suffering even though they are still nothing to celebrate about.
"These figures don’t account for the last few weeks of mortgage mayhem which will have further muddied these incredibly turbulent waters,” Nixon said.
Towards the end of May, many mortgage lenders began pulling products from the market in response to worse than expected inflation.
Since then mortgage rates have continued to edge upwards, with the average 2-year fixed rate crossing the 6 per cent threshold not seen since the immediate aftermath of Liz Truss’s “mini” Budget.
Ranald Mitchell, director of mortgage broker Charwin Private Clients, agreed with Nixon that today’s statistics do not capture the slowdown in business experienced since May.
“There may be seasonality in this but the more likely cause is consumer confidence being hit for six by all the base rate increases. First-time buyers will be worst affected as their confidence is shaken but there are plenty of experienced landlords and cash investors out there ready to snap up the right opportunities,” Mitchell said.
