Debt Levels Rise As Britons Shift Back Into Borrowing

Tue, 15 Sep 2009

Britons are once again turning to debt, with new research showing that borrowing levels in the UK almost doubled in the second quarter of 2009 from the first quarter.

According to professional advice website, Unbiased.co.uk, Brits borrowed a total of £5.5 billion (excluding mortgages ) between April and July, compared to £2.9 billion in the first three months of the year.

While borrowings increased, the website’s Savings Brake research also showed that the UK’s collective savings levels grew to £21 billion, after reaching an all time low of £14 billion in the previous quarter.

But despite the increase, this figure is still 70 per cent lower than savings levels seen this time last year.

As a result, Unbiased concluded that British consumers are now borrowing 26p for each £1 saved, which is significantly lower than the second half of 2008, when consumers repaid £1.61 of debt for every £1 saved.

Commenting on the findings, David Elms, chief executive of unbiased.co.uk, said: "The financial turmoil of 2008 prompted a dramatic retreat from savings in favour of repaying personal debt ."

"The first half of 2009, in contrast, has seen consumers head back down the debt path as they shift back into borrowing . "

"However, it is encouraging to see that Brits are beginning to save again, despite the low interest rate environment.

He added: "After the topsy-turvy behaviour of financial markets and a deluge of contradictory reports on the economy in the media, it is not surprising that many consumers may feel uncertain about their financial standing."

"It is therefore vital for consumers to keep a close eye on their financial position, and anyone with concerns should seek professional advice from an independent financial adviser ."

"Only an IFA will be able to help you strike the best balance between borrowing, saving and other financial aspects."
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