Isa savings received a £9 billion boost in April as the new tax year got under way, while the number of mortgage approvals being made to home-buyers slumped.
In signs that some savers are being attracted by rising rates, there was a record net flow of £9.0 billion into Isas in April, which was partially offset by withdrawals from other accounts.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Isas are having their moment in the sun.
“Higher savings rates and frozen tax thresholds mean protecting our savings from tax is a top priority.
“Meanwhile mortgage misery reflects how tough the start of the year has been in the property market.”
Some 48,700 mortgages were approved for house purchase in April, down from 51,500 in March, according to the figures, released by the Bank of England.
Approvals for remortgaging increased slightly, from 32,200 to 32,500, during the same period.
Hina Bhudia, a partner at Knight Frank Finance, said: “The recovery in home purchasing activity paused in April as mortgage rates continued to tick up.
“Rates are likely to continue rising amid expectations that the Bank of England base rate will need to rise meaningfully higher than its current level of 4.5%.
“As of this morning, borrowers could still secure five-year fixed-rate products below 4.5%, but likely not for long. Leading two-year fixed-rate products are approaching 4.75%.”
Aaron Strutt, product and communications director at Trinity Financial, said: “The issue is that every time the Bank of England hikes the base rate, more confidence is sapped from the mortgage and property markets.”
Excluding the coronavirus pandemic, the amount of mortgage debt borrowed was at its lowest level on record in April, the report said.
A total net repayment of £1.4 billion-worth of mortgage debt was made in April, the Bank’s Money and Credit report said.
This was the lowest level since July 2021, but if the period since the onset of the Covid-19 pandemic was excluded from the data, it would be the lowest level since records started in April 1993, the Bank said.
Thomas Pugh, an economist at audit, tax and consulting firm RSM UK, said: “The fact that net mortgage lending turned negative in April, contracting by £1.4 billion, the lowest level on record excluding the pandemic, suggests house prices have further to fall.”
During April, households deposited an additional £3.6 billion with banks and building societies, following net withdrawals of £3.0 billion in March.
The combined net flow of both household deposits with banks and building societies and National Savings and Investment (NS&I) accounts amounted to £5.2 billion in April.
This was above the average monthly net flow of £4.1 billion during the previous six months.
Tomer Aboody, director of property lender MT Finance, said: “‘Interestingly, households deposited an additional £3.6 billion with banks and building societies during the month, suggesting people are being cautious, retrenching and waiting to see what happens with inflation and interest rates.”
Karen Noye, from wealth manager Quilter, said the £3.6 billion net flow into accounts “could suggest people are making hay in the new tax year, with interest rates at the best they have been for a long time and cost-of-living concerns persisting.
“Clearly, they are still not anywhere near inflation, so savers need to make sure they are assessing their option with their long-term savings as these accounts may not be most appropriate.”
Net borrowing of consumer credit in April remained “broadly unchanged” when compared with March, at £1.6 billion, the Bank of England report said.
Consumer credit includes borrowing such as credit cards, personal loans and car finance.
Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said: “Consumer credit borrowing continues to grow significantly, which partly reflects the impact that sustained high costs are having on household finances.
“With many incomes struggling to cope, there is a risk that more people are left using credit to plug gaps in their budgets.”
UK non-financial businesses borrowed, on net, £0.5 billion of bank and building society loans, including overdrafts, in April, compared with £2.7 billion of net borrowing in March.