The savings boom continues at pace, according to data from the Bank of England, which revealed some £7.3bn was deposited into banks and building societies in July.
Meanwhile, people paid £2.7bn into cash ISAs, taking the total added since the start of April to £24.2bn – around the same figure as the same point last year.
ISA rates have remained higher against the backdrop of interest rate cuts but have now started to fall, with the best easy access ISA deal offering 4.41%, while the top one-year option pays 4.31% and the best over three years stands at 4.25%.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The phenomenal savings boom continues. Within this, enthusiasm for cash ISAs remains robust, although new money flowing into ISAs has slowed as the most competitive rates on the market have fallen.”
Elsewhere, £4.3bn was added to easy-access accounts paying interest, while £1.6bn went into easy-access accounts paying no interest. Savers withdrew from fixed-rate accounts.
“In the broader savings market, there are still some highly competitive easy-access deals, especially from online banks and savings platforms. It’s one reason why easy access accounts have been dominating,” said Coles.
However, she noted that fixed rates are likely to overtake easy-access rates in the months to come, as the market “normalises”, with savers rewarded more for tying their money up.
“It means anyone who doesn’t need a slice of their cash for a year or two should seriously consider tying it up in a fixed-rate deal while rates are so strong,” she said.
The injection of cash savings means more than half of people have enough emergency savings to cover three to six months of essential spending, with the average household holding enough cash to cover 3.3 months – one month more than prior to the Covid pandemic.
“As wages have risen, people have ploughed more into savings rather than spending. It’s the area of our finances that has strengthened the most since the start of the pandemic,” said Coles.
This could be eroded in the coming months, however, as data shows households spend on average about £700 more in December, some 29% more than in a typical month, due to Christmas costs.
Caitlyn Eastell, spokesperson at Moneyfactscompare, said this figure could grow to £730 if inflation hits 4% as forecast, suggesting savers need to put an additional £175 per month for the next four months (including interest payments) to afford the additional costs.
Away from savings, there was good news for those looking to get on the property ladder, with mortgage approvals up for the third consecutive month.
Coles said: “It’s a slow climb, and the mortgage market is hardly shooting the lights out, but it’s another sign of a slow recovery from the post-stamp-duty-holiday slump.
“If you already have a Lifetime ISA, maxing out your contributions for this year could mean an extra £1,000 top up from the government. If you don’t have a LISA, and you qualify for one, then if you have at least a year until you plan to buy – and you aim to buy something worth £450,000 or less – this could be your opportunity to take advantage.”