September saw the effective interest rate for a newly drawn mortgage rise at its fastest pace since December 2021, says the Bank of England (BoE).

Increasing by 29 basis points, the central bank puts September’s rate at 2.84%.

Meanwhile, for outstanding mortgages, rates moved up 7 basis points, to 2.24%. A month ago this was 2.17%.

The BoE also points to households shifting more money into bank and building society deposits in September, with £8.1bn being placed with institutions, which compares with £3.2bn in August.

It says this is the biggest increase in deposits registered since June 2021, when £9.9bn was banked by UK households.

And in September, the new deposit rate gained 55 basis points, rising to 2.49% from August’s 1.94%.

A year ago, the rate was 0.31%.

Hargreaves Lansdown senior personal finance analyst Sarah Coles comments: “For those who are able to keep on top of rising prices, there has been a boom in saving.

“Some of this new-found enthusiasm for saving is thanks to higher savings rates. That’s certainly one reason why we’ve seen more people prepared to fix their savings for a higher rate of interest.

“However, some will be due to worries about the problems that are yet to come. The vast majority of this money is going into accounts not paying any interest, so the driver for these savers has more to do with building a buffer for even tougher times to come than cashing in on savings rates.”