Brits Putting Debt Repayments Over Savings

Fri, 17 Apr 2009

British consumers are saving less and concentrating on reducing their debts, new research has revealed.

A study by website Unbiased.co.uk found that last year Brits repaid a staggering £38.6 billion worth of non- mortgage debt, more than the total amount borrowed in 2007 and 2008 combined.

The figure marks the first year in Unbiased.co.uk’s eight-year study where debt repayments have exceeded new borrowings .

During the first six months of 2008, the British public took out £23 billion in new debt, borrowing 66 pence for every pound saved. Saving levels during the first half rose to a high of £67 billion.

However, the second half of the year saw a dramatic shift in consumer behaviour, with the nation repaying debts of over £61 billion. As a result, savings levels plummeted 45 per cent to £37 billion during the same six-month period.

Overall, the nation managed to put away over £103 billion in savings during 2008, down by almost 30 per cent on savings levels in 2007.

David Elms, chief executive of Unbiased.co.uk, said: "2008 was a year of two halves in terms of people's financial behaviour. The financial turmoil which hit Britain last summer prompted a dramatic retreat from savings in favour of starting to pay down personal debt ."

"This shift itself is no surprise, but its severity confirms the historic impact of the credit crunch on consumer behaviour and evidence suggests this repayment trend is continuing at pace."

He added: "There is an awful lot of consumer fear and confusion out there right now, and it is vital people seek professional advice from an IFA to enable them to strike the best balance between borrowing, saving and other aspects of their finances throughout these difficult times."
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