Rising inflation, increased interest rates and the festive period appeared to weigh on consumer confidence at the end of 2021 as the level of savings and mortgage borrowing dropped.
Bank of England data for December 2021 shows mortgage borrowing and the amount saved by consumers has fallen below pre-pandemic levels.
Its data shows net mortgage borrowing fell from £3.8bn in November to £3.6bn in December.
This is below the pre-pandemic average of £4.2bn in the 12 months up to February 2020.
Meanwhile, the value of deposits put into savings fell from £4.5bn in November to £2.7bn in December.
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The combined net flow into both deposits and NS&I accounts in the 12 months to December 2021 was £3.2bn compared with a pre-pandemic figure of £5.5bn in the year to February 2020.
Consumers did still manage to use an additional £0.8bn in consumer credit from loans and credit cards, while the effective rate on new personal loans fell by 16 basis points to 6.27 per cent in December, the Bank of England said.
“A fall in cash squirrelled away into savings accounts in December is perhaps partly attributed to the unleashing of pent-up demand to revel in the Christmas festivities after Covid restrictions curtailed celebrations for many a year before,” Myron Jobson, personal finance campaigner for investment platform Interactive Investor, said.
“However, it could be more indicative of the impact the escalating cost of heating and eating amid the cost-of-living squeeze has had on households.
“Inflation, which is expected to reach around six per cent by Spring, continues to outstrip wage growth – which means that households will need to save less to maintain their current level of expenditure.
“Many of those struggling to make ends meet may become dependent on loans to cope with the inflationary stranglehold on their finances.”