UK consumers are dipping into their savings at the fastest rate recorded, thought to suggest that they need to do so in order to keep up with rising inflation.
According to the latest data released by UK Finance, the industry body formed from the Council for Mortgage Lenders and the British Banking Association. the amount held in cash Isa accounts fell by ?1.5 billion in October.
This represents the sharpest monthly withdrawal since the figures were first recorded in 2006, and marks the sixth consecutive month of declines.
The report also showed that personal deposits at the main high street banks rose by 2 per cent in the year to October, the same rate as September and the joint-slowest since 2009.
At the same time, borrowing on credit cards slowed in October, rising by 5.1 per cent year-on-year, down from 5.5 per cent in September. The total amount of outstanding credit also slowed, rising by 7.1 per cent in the year, down from an eight-month high of 7.8 per cent in September.
It is therefore thought that consumers are using their savings more to keep up with inflation whilst wage growth is slow, rather than taking on more credit.
Lenders may well be curbing their supply of credit to consumers amid warnings from both the Bank of England and the Financial Conduct Authority (FCA) who have raised concerns about the growth in consumer credit.
The number of new mortgages approved was also down by 3 per cent when compared to October 2016. 40,488 new mortgages were approved in October, down from 41,576 in September.
The number of remortgages rose from 30,499 in September to 34,036 in October, as consumers acted to achieve a low mortgage rate before the Bank of England raised the base rate of interest in November.
It is generally expected that further base interest rate rises will follow as the Bank of England attempts to bring inflation back to a target rate of 2 per cent.