4 May 2022
If you are covering the Bank of England’s Money and Credit statistics, please see the following comment from Rosie Hooper, chartered financial adviser at Quilter:
The Bank of England has revealed that the British public are very much back to spending on their credit cards with consumers borrowing an additional £1.3 billion in credit, on net, of which £0.8 billion was new lending.
Often credit cards have some of the highest interest rates so if people are opting to pay their essential bills on their credit card to help make ends meet in this new fiscally challenging environment this could spell very bad news as people spiral into debt. A good illustration how stark the difference is, is that in Q1 2021, £3.6bn of credit card debt was repaid, while in Q1 2022, £2.1bn was loaded onto credit cards as debt.
Elsewhere in the figures, the number of approvals for house purchases, which are an indicator of future borrowing, were little changed at 70,700 in March, from 71,000 in February but is still slightly above the 12-month pre-pandemic average up to February 2020 of 66,700. This illustrates the housing market is coming back to earth after unsustainable levels of transactions over the past few years due to a range of factors including the lure of the stamp duty holiday and larger properties to ride out the worst of the lockdowns. However, with interest rates set to go up buyers may still be scrambling to get on the housing ladder and secure a mortgage before rates go even higher.
More positively, the nation does seem to be bracing for a significant squeeze on their finances and are putting more money into savings. Before March there was a downward trend in the amount being deposited into savings accounts. However, £6.0 billion flowed into savings accounts in March 2022, compared to a monthly £5.5 billion on average during the 12-month pre-pandemic period up to February 2020 but this still pales in comparison to how much people were putting away during lockdown when there was little to spend spare cash on.
It’s no secret that with inflation running riot and interest rates on the rise too households are going to be struggling with their finances more than ever and it is wise to try and put money into savings during these difficult times if at all possible.
Rosie’s tips for boosting your savings:
- Understand your incomings and outgoings: Take a look at what you have coming in each month and what comes out of your account in terms of bills and payments. This will give you an idea of what might be possible when it comes to saving, or if you need to make any cutbacks to make ends meet.
- Create a budget: Get your financial position for a normal month written down on paper. You are more likely to stick to a budget this way, allocating specific amounts for specific things. This can also be easily altered as and when your circumstances change.
- Have an emergency rainy day fund: While we like to save for something in particular you should make sure you at least have a rainy day fund in case of emergencies, such as a broken boiler or car repairs. Aim to have three to six months of expenses in this pot, and be sure to top it up should you need to dip into it.
- Consider investing for the long-term: Once you have built up a decent savings pot you should consider creating an investment pot for longer-term savings. Putting money to work in the stock market for five years or more gives it the best chance to grow at a greater rate than inflation. The sooner you invest and the longer you do it for, the more likely you are to have the potential for healthy returns regardless of short-term blips. There are many services out there that will help get you started.
- Seek professional advice: If you are in a position to speak to a financial adviser. They can help create a financial plan tailored to you that will help see you through the ups and downs, while also tweaking it according to your real-time circumstances. This ensures your money is working as hard as it can be. Other services such as Citizens Advice or Step Change can help you with debt advice, while there are a number of websites out there with great guidance to get you started on your saving journey.
