Yahoo Finance Families pile record £12bn into Isas as interest rate cut looms
Savers put away a record amount of cash into Isas last month in anticipation of a looming interest rate cut by the Bank of England.
Families deposited an extra £11.7bn into Isas in April, the highest since records began 25 years earlier, Bank of England data showed.
The sharp increase came as the central bank is expected to begin lowering interest rates from a 16-year high.
Inflation fell to 2.3pc in April, placing it within touching distance of the Bank’s 2pc target.
Overall, households put away an extra £8.4bn in savings last month when taking into account the impact of deposits and withdrawals.
This was the largest amount put away since September 2022, when former prime minister Liz Truss’s disastrous mini-Budget triggered market turmoil.
The Bank of England said the rise in savings last month was “almost wholly” driven by families loading up their Isas.
The figure is nearly twice the monthly average of £4.8bn in the two years before the pandemic.
The rise in savings appears to have resulted in depressed sales for retailers, which reported a 2.3pc drop in volumes of goods sold last month amid wet weather.
It suggests shoppers have put off refreshing summer wardrobes and garden furniture, locking in higher interest rates instead.
The Bank of England’s figures also show that families spent less on credit cards last month, falling to £0.2bn from £0.7bn the previous month.
Thomas Pugh, economist at tax consultancy RSM UK, said that retailers may see a boost later in the year from pent-up savings.
Mr Pugh said: “Real earnings are rising rapidly now that inflation has fallen, and household balance sheets are looking stronger. This should set the stage for a revival in consumer spending later this year.”
Rob Wood at Pantheon Macroeconomics added that while the figures were “disappointing” he still believed “households will be willing to spend more this year”.
He said savings appear better distributed among households, with the share of families lacking a cash buffer to cover a £850 emergency falling to 24pc in May from 33pc in February 2023.
Traders are fully pricing in the first cut to interest rates in November this year, but many analysts believe it could come as soon as August.
The figures from the Bank of England also showed that mortgage approvals stagnated in April at 61,100, a slight decrease from 61,300 the previous month.
