UK Households Raiding Savings As Cost Of Living Crisis Continues To Bite

What The Bank of England says a record number of British households are withdrawing funds from their savings accounts

Why High inflation and energy costs have pushed many families beyond their monthly budgets

What Next Investments into assets such as crypto are rising to try to offset inflation effects

British households withdrew a record amount from their savings in May, according to data from the Bank of England.

The data showed that households drained a net £3.8 billion from their savings, the largest outflow since records began 25 years ago.

The outflow was driven by withdrawals from bank accounts. Meanwhile, unsecured lending to consumers saw a smaller net increase of £1.14 billion in May compared to the previous month. Economists had expected a net increase of £1.5 billion in consumer credit lending.

The drawdown of savings likely reflects the higher cost of living due to rising inflation. Some analysts predict a decline in consumer lending in the coming months as higher interest rates may prompt households to cut back on borrowing.

We understand the increasing cost of living is difficult for people. You can share your experiences and ask us questions about our decisions by joining our Citizens’ Forum. Find out more here: https://t.co/Awtp8yU6Oh

— Bank of England (@bankofengland) June 22, 2023

Crypto Becomes Attractive Alternative

The increase in interest rates, which do benefit savers, have been nullified by high inflation, which has been well above the 2% targeted by the Bank of England for many months.

As in the past during times of high inflation, it is common for investors to look for inflation-beating alternatives, or safe havens, to try and counter the loss in the value of their funds.

Gold was a classic safe haven, but notoriously difficult to get into for the average person. Cryptocurrencies, on the other hand, are much more accessible through online devices, and purchases and sales can be actioned virtually instantly.

According to the Financial Times, cryptocurrency ownership doubled in 2022, and the average holder had just under £1,400 worth of cryptocurrency assets in their wallets.

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