Households in financial difficulty deposited less money in their accounts in May than in April.
Some £5.7bn was deposited in banks, building societies and NS&I accounts in May, down from a combined net flow of £6.3bn in April, according to the Bank of England’s Money and Credit report.
The total, however, was broadly in line with the monthly average seen in the year before the coronavirus pandemic.
A series of Bank of England base rate hikes have taken place in recent months, pushing up some savings rates.
Laura Suter, head of personal finance at AJ Bell, said: “The reality is that these average numbers hide a divided nation, with some households able to withstand rising prices for food, petrol, energy and almost everything else, either by budgeting and cutting costs or because they have enough income to cover them.
“These households are also still able to put money aside each month, and with tough investment markets, some are likely to park it in cash rather than dive into the markets.
“On the other hand, we have another part of the population who have exhausted their savings, cut all possible cuts and are now turning to debt to pay their bills each month. Budgeting can only get you this far if your income isn’t growing and all your bills are.
“A silver lining for those who have been able to save money is that the Bank of England rate hikes have boosted savings rates.
“In May, average fixed-rate savings account rates rose 16 basis points to 1.25%.
“Offered rates for one-year and two-year fixed-rate bonds hit their highest level in more than three years.”
Annual growth in household borrowing using consumer credit, which includes credit cards, personal loans, overdrafts and auto financing, remained unchanged in May at 5.7% – the highest rate since an increase of 5.8% in February 2020.
Within this framework, the annual growth rate of credit card borrowing was 11.2% and the annual growth rate of other forms of consumer credit was 3.5%, according to the Bank’s report.
Reflecting that borrowing is becoming more expensive, the typical interest-bearing credit card rate rose to 18.38% in May from 18.08% in April.
Meanwhile, the number of mortgage approvals granted to homebuyers, which is an indicator of future borrowing, rose to 66,200 in May from 66,100 in April.
This figure is slightly lower than the pre-pandemic 12-month average to February 2020 of 66,700.
Jeremy Leaf, a North London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: ‘What is happening on the ground is that buyers and sellers are inevitably more cautious given the steep rise in the cost of living and interest rates with probably worse to come.
“Nevertheless, we are seeing few attempts at renegotiation or withdrawal as buyers in particular know that the continued shortage of stock means there will be little alternative.”
Karim Haji, head of financial services at KPMG UK, said: “The data sadly confirms the bleak picture emerging for the UK economy as consumers and businesses face challenges on several fronts, but in particular because of rising inflation.
He added: “As strong demand for housing continues to drive up prices, rapidly declining affordability could be a key driver of a near-term slowdown as higher interest rates are passed on to the borrowers.
“A useful temperature check will come in the form of semi-annual trade updates from major UK banks at the end of the month. Their statements will be scrutinized for evidence of confidence or concern about the state of the economy.
Large non-financial corporations repaid £1.9bn of bank loans in May, compared with £2.6bn of borrowings in April.
Small and medium-sized enterprises (SMEs) repaid £210m of bank loans in May, less than an overall repayment of £489m in April.