Consumer borrowing sees two-fold increase

07 July 2008

But savings fall by £11bn causing climb in savings break

Latest research has indicated that consumer borrowing increased to £22.4bn in the first quarter of 2008 – an increase of £13bn on the same quarter in 2007.

According to “The Savings Break survey”, carried out by unbiased.co.uk a company which promotes independent financial advisers (IFAs), consumer saving in the first quarter of 2008 decreased by £11bn to £32.7bn.

This resulted in a huge climb in the savings break from 29p in the first quarter of 2007 to 69p in the same period in 2008.

The savings break is the ratio between how much consumers are borrowing (excluding mortgages but including credit cards, overdrafts and loans) and saving. This means the recent data indicates that for every pound saved, people borrowed 69p.

David Elms, chief executive of unbiased.co.uk, said: “Consumers are playing double jeopardy – not only increasing the amount they are borrowing, but also reducing the amount they are saving.

“The early months of the year have traditionally revealed British consumers at their most financially stretched – the worry is that this year the scenario is even more bleak than normal.

“A bad situation is being made worse by the fact that – as the credit crunch bites – there is less credit around.

“Over 10,000 mortgage deals have been withdrawn and personal loans are more expensive than last year, making it harder for people to find affordable credit,” he added.

Mr Elms went on to advise that consumers need “to take control and start managing debt better” and also that it would help if consumers put “some money away for the future”.

“It has never been more important for people to take control of their finances to ensure their savings and borrowings remain at a healthy level,” he said.

Get your savings off to a good start by comparing high interest savings accounts