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Bank of England data reveals record withdrawals from banks - reaction

ended 29. June 2023

This morning, the Bank of England announced that “during May, households, on net, withdrew £4.6 billion from banks and building societies, which marked the highest level of household withdrawals on record.” You can read the full report >> here <<. UK newswire, Newspage, asked money experts for their views, below.

6 responses from the Newspage community

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Mike Staton
Director at Staton Mortgages
Why should this be a surprise? The public has lost faith in multi-billion pound organisations that are ripping off their customers by not passing on the interest rate increases to their savings accounts. People are getting memories of the Northern Rock crash and are concluding their money is much safer in their mattresses. I have had a few clients withdraw huge lump sums to pay off part of their mortgage, why leave it in a bank account earning a measly 1% when it can be saving you 5.5% on your mortgage?
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Justin Moy
Managing Director at EHF Mortgages
The £4.6bn withdrawal does balance off the £3.7b increase in deposits in April, but there is more than an underlying trend towards debt repayment, whether it is mortgage or unsecured borrowing, and using cash savings in other ways, such as investment and pension contributions. The end of tax year activity was strong with my IFA partners with the Pension Lifetime allowance changes. But this may also show plenty of inter-generational money moving around, with parents helping children with the cost of living at the moment, including raised mortgage costs. It likely reflects the Bank of Mum and Dad helping pay down mortgage balances, probably the same they helped with a deposit a few years back.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
From what I understand, this is the first reversal of net deposits since 2008, with withdrawals exceeding deposits. It is a tell-tale sign that a huge number of households are now seriously struggling amid the cost of living crisis and a period of rising interest rates. UK households are clearly feeling the pinch, which will curb spending and hopefully reduce consumer-led inflation in the near term, easing pressure on further rate rises.
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John Choong
Senior Equity Research Analyst at Investing Reviews
As the cost-of-living crisis continues and with mortgage rates now comfortably in the 6% range, monthly mortgage repayments are ticking up sharply for many households at a time when energy and food bills are also soaring. Also, a significant number of people will be coming off ultra-low fixed rates in the months ahead. As such, it's no surprise to see net withdrawals from banks and building societies hit an all-time high of £4.6bn in May. However, high street banks could benefit from this as withdrawals of interest-bearing sight deposits more than doubled, from £5.4bn to £11.4bn. This would ease the pressure on banks' net interest margins with fewer interest-bearing deposits now on the book.
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Chris Sykes
Technical Director and Senior Mortgage Adviser at Private Finance
With the dramatic increase in many people's monthly payments when remortgaging, we are seeing lots of clients withdrawing money from their savings and investments in order to overpay their mortgages. This can be within their usual 10% overpayment allowance or it can be with larger lump sums when refinancing. This, along with additional withdrawals people are having to make due to the increased cost of living, means these grim figures are sadly no surprise.
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Graham Cox
Director at Bridging Hub
These figures exposes the huge financial pressure people are under, forcing many to use up whatever savings they've got to mitigate the cost of living crisis. But it also illustrates how slow banks have been to raise savings rates in line with the Bank of England base rate rises. Is it any wonder savers are pulling their funds when many people's real inflation rate is 10 percent plus, and they're getting a paltry 2-3 percent. Effectively they're losing 7 percent of they're purchasing power. Maybe we should windfall tax the banks again.