Households Raid Savings At Record Rate
Households are pulling money out of their savings accounts at the fastest rate in modern record, according to Bank of England figures.
In the past year, families have withdrawn £23bn from their long-term savings accounts to convert into cash and put into current accounts - the equivalent of around £900 for every household in the country.
It is the most dramatic evidence yet that Britons are paying for the rising cost of living by raiding their savings accounts.
Analysis of the Bank's figures by Sky News shows that in the year to October, the amount of cash in time deposits and cash ISAs fell by 4.7%, while the amount families have in their instant access current accounts or in their pockets rose by 11.2% - some £71bn.
According to economists, the shift of cash is the biggest since comparable records began in the 1970s, and reverses much of the sharp increase in saving that happened at the height of the recession.
On Thursday, the Chancellor's Autumn Statement is expected to focus on measures to help households deal with the rising cost of living, including energy bills.
Since the recent recession began, millions of workers have suffered repeated effective pay cuts as inflation has outstripped pay rises.
As well as paying for household bills, economists also believe that people's use of savings may have contributed to recent economic growth.
The news comes amid growing evidence that consumers' appetite for spending is on the rise in the run-up to Christmas.
Consumer spending was one of the main contributors to the sharp rise in gross domestic product in the third quarter, and a further strong increase is implied by the Bank's money figures.
But while the figures suggest that the economy is strengthening, they will also be taken as further evidence that savers are being deterred from putting money aside by record low interest rates.
According to new figures from the Bank, the average interest rate on long-term savings accounts has now dropped to 2.4% - the lowest level since comparable records began in 1999.
Some also suspect that with households still facing a significant squeeze as a result of higher living costs, many are having to dig into their savings in order to afford day-to-day items.
Simon Ward, chief economist at Henderson Global Investors, pointed out that on top of the £900-per-household shift of cash out of long-term savings, families have also put £21bn†- a further £800 per household - which might normally have gone into savings accounts into their spending money.
"Consumer strength usually reflects increased borrowing but this hasn't been the key factor recently," he said.
"Instead, households have been running down their savings accounts balances, probably in reaction to the pathetic interest rates now on offer.
"Increased spending is lifting growth and incomes, and money is flowing back to other households, in a virtuous circle."