New figures from the British Bankers’ Association suggest that the rising cost of living in the UK is affecting the amount British people are able to save and causing some families to dip into savings accounts for their day to day expenses. They also report a slowing in the rate of approvals for new mortgages.
The same report also found that lending to private business decreased by £2.5bn between May and June.
The British Bankers’ Association analysed the amount of money deposited into savings accounts between January and June in 2011 and compared it with January to June 2010.
£6.1bn was saved this year in comparison with £15.9bn last year. The British Bankers’ Association suggest that this could be due to rising prices of regular household bills such as petrol and diesel, grocery shopping and utilities. Experts are concerned that half of the major energy providers in the UK are due to announce further price rises this week which will only force people to dig deeper into their savings accounts to make ends meet.
According to the National Statistics Office, the rate of inflation in the UK stood at 4.2% in June. Between May and June alone, the cost of grocery shopping is said to have risen by 0.9%. In the same period in 2010, it fell slightly by 0.1%.
Very low interest rates are also thought to be contributing to much lower levels of saving. Normal high street banks are offering particularly low returns on savings which could be another reason that deposits are slowing.
The British Bankers’ Association figures also suggest that the amount loaned to customers on mortgages and credit cards was also low. Most notably, repayment income exceeded the amount of new borrowing on credit cards overall.
Although the amount of new, approved mortgages rose in June this year, the figure is still 6% lower than in June 2010 at 31,747 approved products. Chief UK economist at IHS Global Insight, Howard Archer, expects house prices to fall by a further 5% over the coming year as a result. This would result in an overall drop of 10% in the last two years.
The number of accepted remortgages rose by just under 10% to 24,080 in June 2011, compared to 21,967 in May. One reason for this trend could be that interest rates were expected to rise, although this prediction has not yet materialised, and some analysts believe interest rates may now stay at their current levels until 2012. High street lenders are increasing their remortgage offerings for homeowners in an attempt to revitalise the mortgage market and increase competition.
Statistics Director at the British Bankers’ Association, David Dooks, said the figures generally prove that the mortgage market in the UK remains stagnant, adding: “Some growth is coming from the buy-to-let sector to meet demand for rental properties.”