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Savings Brake Deteriorates, Revealing Worrying Trend
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A climate of relatively high interest rates and the continued uncertainty of consumers due to the effects of the credit crunch have led to changes in the propensity of Britons to save and to borrow, it has been revealed.
According to financial advice website Unbiased, their latest Savings Brake figures - which reveal the ratio of how much we are borrowing, not including mortgage debt, contrasted with how much we are saving - the UK as a whole borrowed over £11.7 billion in the third quarter of 2007. At the same time, UK savings levels have dropped by over £11 billion as consumers are accessing their savings to pay for summer expenditure such as holidays.
The combined effect of increased borrowing and falling savings levels has therefore contributed to the fact that for every pound saved in July, August and September the British public borrowed 35 pence - a massive increase on the 13 pence borrowed against every pound in April, May and June.
According to David Elms, chief executive of Unbiased, the high level of borrowing and a drop in savings was expected - and as a result a greater effort needs to be made to educate consumers on the importance of saving and the need to borrow only if they can afford the repayments. However, he still expects the savings brake ratio to worsen before it gets better.
As a way of arresting this decline, Mr Elms believes individuals should take a greater interest in their financial affairs in order to ensure that their savings and borrowing remain at healthy levels. The independent financial advice site has also made a number of suggestions which could help consumers reduce their expenditure and therefore increase their ability to save. Notably, they recommend that consumers should take care when making online purchases - be it on iTunes or eBay - as the facility makes it particularly easy to spend money which in turn means it is particularly easy to get carried away.
Meanwhile, rather than join a gym Britons are advised to go for a run in the park, and water is advocated as an alternative to a morning coffee in Starbucks. Shopping with a list, doing without Sky TV and using a library rather than buying books is also recommended.
Lastly, Britons who choose to take out a personal bank loan should shop around for the best available deal as if they don't they run the risk of paying over the odds to secure credit - and this could have serious consequences in the medium to long term.
Paul McIndoe
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