Four in ten savers already using savings to combat cost of living crisis

Nearly a fifth of these savers have used over £1,000 of their savings over the past 12 months.

Four in ten savers have been forced to use their savings account to help cope with the rising cost of living over the past 12 months.

This is according to Yorkshire Building Society and the Centre for Economics and Business Research’s Inflation Nation report, which was released today.

“Families across the UK are already having to budget carefully in order to make ends meet. Some have accrued savings over the course of the pandemic, which can help foot monthly bills. Others simply do not have the financial resilience to withstand rising costs,” said Stephen White, Interim Chief Executive of Yorkshire Building Society. 

The report also found that of these savers, 23% used between £200 and £499 of their funds, 17% used more than £1,000 and 12% had used between £500 and £999.

It is the long-term impact of using savings to finance living requirements which is concerning for Nitesh Patel, Strategic Economist at Yorkshire Building Society.

“The concern is not only the here and now – but the knock-on effect of depleted savings for the future. Those planning to buy a home, for example, may have to wait considerably longer while they build up their savings again,” he explained.

In fact, potential first-time buyers are already delaying their purchasing plans in order to cope with their own cost of living.

For other consumers who might feel pressurised to take on more debt to fight the rising prices, there is always the option to reach out to organisations such as Citizens Advice, Patel advised.

“Those who are less financially resilient are encouraged to seek help from organisations such as Citizens Advice so that they can navigate the coming months – and potentially years – without getting into debt, or, indeed, getting into further debt,” he stated.

Savers, however, can take some comfort in the knowledge that average savings rates are increasing.

While not in line with inflation, the average easy access savings rate for May stands at 0.39%, which has almost doubled when compared to the beginning of the year at 0.20%.

It is also better than May 2021’s average rate of 0.16%, but 0.23% less than the rate recorded in May 2019.

As for notice accounts, the average rate stands at 0.78% as of May this year, which is 0.22% more than what was recorded at the beginning of 2022.

ISA rates share a similar story to the average savings rates, according to our data.

Despite four successive base rate increases, the average no notice ISA rate is 0.46%, which is 0.19% more than the figure at the beginning of the year.

Still, the average rate for May is some way off the 0.98% recorded in the same month of 2019, the year before the COVID-19 pandemic.

Notice ISAs, on the other hand, logged an average rate of 0.64% this month, 0.27% more than what was recorded in the same period last year.