In September, NS&I hoovered up a staggering £7.7bn of savers’ cash. Its biggest monthly intake since taking lockdown cash in August 2020.
They did it by offering two market dominating 6.20% fixed rate bonds. Sticking head and shoulders above the next best deal of 6.03%.
Now those deals have gone, we can look at the mark they left on the market, and where savers should look now.
How did it happen?
Following the rush in to fixed rates a year ago, NS&I targeted the wall of cash maturing from those fixed-rate bonds. Positioning themselves as the obvious choice before interest rates potentially start to drop.
But the figure raised is set against a challenging backdrop. Many of us continue to reach into savings as costs rise and inflation eats away at our money’s spending power.
In fact, in September the Bank of England (BoE) quoted £9bn being withdrawn from accounts offering variable rates, or no interest at all.
What could I do now?
The news is telling us there’s still an appetite for good deals while rates remain high. And although savings rates have backed off very slightly in October, it hasn’t been dramatic.
Some great deals are still around, and it’s the smaller banks offering them.
That’s because these smaller banks compete for your money. While bigger banks get away with lower rates by relying on customer inertia.
Savings platforms like Active Savings partner with a wealth of smaller banks and building societies. They offer consistently competitive rates, on a wide range of terms. New rates are added and removed all the time, so check our website for the latest.
Remember, fixed rates normally don’t let you take out your savings until after the term ends. It’s a good idea to make sure you’ve already built up an emergency savings pot you can get to quickly before fixing other savings.
This article isn’t personal advice. If you’re not sure whether an investment is right for you, please seek advice.
Mortgage approval rates decline
NS&I’s savings figures emerged in the BoE monthly snapshot of our finances. But they also revealed the dire state of the mortgage market.
Mortgage rates kept on rising through much of September, chasing buyers further down the road, killing demand, and denting house prices.
Zoopla figures out last week showed prices were down 1.1% in a year – the sharpest annual fall since 2009, in the wake of the financial crisis.
The market remained convinced that inflation was going to be stickier than expected, so rates stayed stubbornly high through a big part of the month. This convinced buyers to sit it out.
Approvals for new purchases were at a nine-month low, as the average rate on new mortgages rose 19 basis points, to more than 5%.
The good news is that mortgage rates have fallen since and are continuing to drift south.
Unfortunately, they’re still well ahead of where they were in the spring. So, there’s every chance this isn’t going to spark a major turnaround in the fortunes of the housing market, and the rest of the year is likely to stay fairly lacklustre.
If you’re looking at buying a house, it’s important to make the most of any help you can get.
One of the best ways to do this is through a LISA – you could save up to £4,000 every tax year into a LISA and then get £1000 of government bonus on top.
ISA and tax rules can change, and any benefits depend on your circumstances. Unlike cash, investments can fall as well as rise in value so you may not get back what you invest.
This article isn’t personal advice. If you’re not sure what’s right for your circumstances, ask for financial advice.
How to use a Lifetime ISA to purchase your first home
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