Cost of living crunch hits savings boom, and housing market fizzles

Laura Suter
29 November 2021

Laura Suter, head of personal finance at AJ Bell, comments on the latest Bank of England mortgage, debt and savings figures:

“The end of the stamp duty holiday signalled a drop off the cliff in the housing market, in terms of transactions and the amount borrowed, with an 83% fall in net borrowing by individuals between September and October. The rush to get transactions through before the stamp duty deadline at the end of September means that some of this fall is likely to be temporary, as October deals were pushed through early. 

“Rather than gloomy predictions of a housing market coming to a standstill after the stamp duty holiday ended, instead it looks like it’s just returning to-pre pandemic levels. Approvals for house purchases, which are a good indication of the future direction of the market, show there was a drop between September and October but to around the average for February 2020, before the pandemic became a factor. 

“Despite the figures only being a month old, the picture they paint of mortgage interest rates is very different to current reality. The data shows that average mortgage rates fell to another record low in October, dropping to 1.59%. However, November saw rates tick higher in anticipation of a Base Rate rise and this is a trend we don’t expect to reverse any time soon.

“The cost of living crunch means the UK’s savings surge is petering out and is another thing that’s returned to pre-pandemic levels. On average we put £5.5bn into banks and building society accounts in October, which is the lowest amount since February 2020. Once we include deposits into NS&I the amount rises to £6.4bn, still almost half the 12-month average up to September this year. 

“This savings boom is unlikely to rebound in the coming months as rising prices continue to eat into everyone’s spare cash, while the extra spending we all do at the end of the year means many will use some of their savings to pay for a bumper Christmas after missing out last year. We’re already seeing spending creep up, with more people using their credit cards in October, borrowing £600m in the month – the highest since July 2020.”

Laura Suter
Head of Personal Finance

Laura Suter is head of personal finance at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.

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