London: In a response to rising borrowing costs, UK households made a record £3.8 billion ($4.8 billion) withdrawal from their savings in May, marking the largest monthly outflow in 26 years since records began in 1997. The Bank of England's data reveals that there was a notable surge in withdrawals from easy-access savings accounts, amounting to $18.5 billion in May.

It is speculated that a portion of the withdrawn funds found their way into fixed rate savings accounts, which offer higher interest rates, as well as tax-free individual savings accounts (ISAs). Additionally, Britons contributed over $1 billion to the government's National Savings and Investment bank, as evidenced by the data.

The Bank of England's efforts to curb persistent inflation have led to an increase in home loan payments, exacerbating the cost-of-living crisis. Simultaneously, the surge in interest rates has slowed down borrowing rates. Notably, major UK lenders recently announced another round of mortgage rate hikes through brokers, resulting in an average rate surpassing 6% in many cases.

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Although mortgage approvals in May rose to 50,524 from a revised figure of 49,020 in April, they remain lower than the approximately 66,000 approvals seen in May 2022, prior to the escalation of borrowing costs impacting the housing market.

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