In a week when the initial speculation on the consequences of a ‘no deal’ Brexit was published and the government reignited its civil war, some headlines which could have done with more attention were mostly ignored. For example, the trade body UK Finance released figures on Friday that looked at household finance for British household and came to a number of concerning conclusions.
The first was that families and investors have all but deserted traditional savings accounts. British households in particular see little point in adding to or starting savings accounts with traditional high street banks.
To give the issue some context, in 2016 the rate of growth in which savings deposits were growing was 5.1% before slowing to 4% in January 2017 and then 2% by December of the same year. The most recent figures, looking up to July 2018, show that growth has slowed to just 1.2%, the lowest since the measurement was started 11 years ago.
Explanations for the shift vary with some noting that deposits into instant access savings have increased recently, meaning savers are keener to have their money close to hand. However there are others who suspect that other options which might have once been considered the domain of the experienced investor is now becoming part of the mainstream.
Investments into growth funds have increased, as have investments into buy to let and off-plan property as the sector has continued to become increasingly well-understood and widely available.
With traditional routes to savings growth providing low returns since the 2008 banking crisis there has been unprecedented innovation in finance making it easier than ever for smaller investors to get into property, stocks and shares and also money lending.
Property itself, outside of London at least, has seen some of the highest returns for smaller investors with good buy to let investments returning NET yields of 5% or more in comparison to the approximately 1% returned by traditional savings accounts.
Peter Tyler, director at UK Finance, suggested to the Financial Times that fears connected to the wider economy could be responsible for the shift. “The broader economic outlook remains mixed, with households continuing to see their incomes being squeezed by rising inflation,” he said.
Whatever the truth is, in uncertain times buy to let property investment almost always attracts the attention and capital of concerned people who are looking for a safer option for their savings.
With that in mind, it perhaps shouldn’t come as a surprise to see the buy to let sector continue to grow over the rest of the year and into the future.
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