30 September 2022
If you are covering the latest Bank of England money and credit statistics, please see the following comment from Rosie Hooper, chartered financial planner at Quilter:
“This morning’s money and credit statistics from the Bank of England show consumer credit took a slight downtick in August, while the number of people saving has remained steady. However, the ongoing cost-of-living crisis is now well and truly taking its toll and these latest figures continue to show just how tightly the nation is having to pull on its purse strings, particularly given worse is likely still to come.
Saving vs borrowing:
“The Bank of England reported that combined net flow of savings into both deposit and NS&I accounts in August was unchanged at £4.3 billion, though this remains well below the average monthly flow of £5.5 billion during the 12-month pre-pandemic period to February 2020.
“Consumer credit borrowing was £1.1 billion in August, down from £1.5 billion of borrowing in July. While this was a month-on-month reduction, it remains above the 12-month pre-pandemic average to February 2020 of £1 billion.
“While the drop in people turning to credit is a positive, the current level of borrowing is still concerning given the ever-rising Bank of England interest rates that are now predicted to head towards 6%. Credit cards will have some of the highest interest rates at present, and if the borrowing is to pay for the rising cost of living or essential bills even before the next energy bill price cap is introduced, then people could risk rapidly falling into unmanageable debt.
Mortgage debt and future borrowing:
“What’s more, all eyes will be on the housing market in the coming months, particularly after lenders pulled mortgage products from their shelves at a rapid rate following last week’s mini budget – the fall-out of which has altered the outlook for interest rates. Approvals for house purchases, an indicator of future borrowing, saw a steep uptick in August to 74,300, up from 63,700 in July – a notable rise following the downward trend seen in recent months. Net borrowing of mortgage debt also increased to £6.1 billion in August, up from £5.1 billion in July. Given the current circumstances, turbulence in the market is something we can expect for some time yet.
Rosie’s tips for boosting your savings:
“As we head into the winter, we can expect the cost-of-living crisis to take an even firmer hold. While it is positive to see savings levels maintained at present as it indicates people are still finding some spare cash to save, with the worst still likely yet to come this may not be maintained over the longer term. Given the further financial squeeze heading our way, having a cash buffer will become all the more important.”
- 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 or seek guidance: If you are in a position to, it is a good idea 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.
