Savers stash away cash at strongest rate for nearly three years
Savers piled cash into their accounts at the strongest rate seen in nearly three years in May, according to a high street banking report.
The British Bankers' Association (BBA) said personal deposits, including accounts such as current accounts and savings accounts, have been growing more strongly in recent months - and in May the annual growth rate lifted to 4.8%, the strongest increase since July 2013.
Despite the surge, cash Isa deposits fell by £600 million in May month-on-month.
Isas have traditionally had tax advantages over other types of account, but all this changed in April with the launch of the personal savings allowance.
The allowance means basic rate taxpayers can now earn up to £1,000 in savings interest tax-free, while higher rate taxpayers will be able to earn up to £500. Many current accounts are offering rates which are much higher than consumers can expect from a traditional savings account, including Isas, with rates of 3%, 4% and 5% on offer.
Meanwhile, the BBA said consumer credit is continuing to grow at an annual rate of around 6%, reflecting favourable interest rates on personal loans and overdrafts.
And the number of mortgages approved for house purchase edged up in May, with 42,187 loans approved, up from 39,967 approvals in April.
A stamp duty hike in April for buy-to-let investors has meant many house purchases were brought forward in early 2016 which may otherwise have taken place later this year.
Housing market experts have warned that the vote to leave the EU is likely to disrupt the property market in the coming months, as potential home buyers and sellers wait to see what the impact will be on the economy, mortgage rates and jobs.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "Housing market activity and prices now look to be at very serious risk of an extended, marked downturn following the UK's decision to leave the UK.
"This is likely to weigh down markedly on economic activity and consumer confidence, which is not good news for the housing market."
The BBA also said borrowing by non-financial companies increased by £228 million in May, showing similar growth to that seen in March and April.
Dr Rebecca Harding, chief economic adviser at the BBA, said: "Consumers are increasingly using short-term borrowing for spending, amid uncertainty around the economy and EU referendum.
"Mortgage approvals have bounced back following the sharp drop in April, caused by the initial reaction to the stamp duty surcharge. This increase suggests that claims of a slowdown in house price inflation may be premature.
"There has also been stronger growth in bank lending to manufacturing throughout the year. Businesses have shown stronger demand for finance in 2016 and will be keen that today's referendum result does not slow activity down."
