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Rush to repay debts proves short-lived as Brits return to borrowing

 

·  Latest year on year figures reveal rising borrowing levels and a sharp fall in savings

·  Brits borrowed 62p for every pound they saved in Q4 2009, and “the situation looks unlikely to improve in 2010”

·  An IFA can help restore your financial balance: visit unbiased.co.uk

New research from unbiased.co.uk, the professional advice website, reveals Brits are returning to their borrowing ways, as by Q4 2009 they were borrowing 62p for every pound that they saved.  These figures indicate that increased public borrowing and lower savings levels will continue as a trend throughout 2010. 

According to unbiased.co.uk’s Savings Brake* research, by the end of 2008, the public were conscious of their debt levels and working hard to repay what they owed, with £1.68 being repaid for every pound they saved.  However, these virtuous repayment habits of 2008 failed to continue, with the borrowed amount creeping higher by the start of 2009 and increasing throughout the year.   Consumer fears of the credit crunch which jolted them with better financial habits appear to be fleeting, as in Q1 2009 Brits were borrowing 13p for every pound they saved and by Q4 2009 this had increased to a massive 62p for every pound saved. 

Overall in 2009, Brits borrowed a staggering £28.2 billion worth of non-mortgage debt.  This is a stark contrast to the £39.3 billion which was repaid during 2008.  It appears that the hopes of the recession kick-starting a savings culture have also been short-lived, as new savings levels have almost halved during 2009, with only £71.6 billion being saved, compared to a massive £113.4 billion in 2008. 

Unbiased.co.uk’s Savings Brake research reveals the ratio of how much we are borrowing (including unsecured borrowing and equity release but excluding mortgages) contrasted with how much we are saving. The research shows that for every pound Brits saved in 2009, they also borrowed an average of 40p. Overall, the nation managed to put away over £71.6 billion in new savings during 2009, which marks almost a 50% decrease compared to new savings levels in 2008 (£113.4 billion).  Even more worryingly, overall savings levels appears to be decreasing year on year, with a total of £144.9 billion of new savings in 2007, falling to £113.4 in 2008 and £71.6 in 2009.  This spells out a concern for people’s future financial provisions. 

It appears that a return to borrowing instead of paying off debt has been steadily increasing throughout 2009, and while Britain is now out of recession we are still a long way off being financially debt-free.  At the beginning of Q1 2009, the public were only borrowing 13p for every pound saved, which rose to 30p in Q2, 43p in Q3 and to a high of 62p in Q4 2009.  Savings levels fluctuated much more across the year, but failed to reach anywhere near the levels of 2008, with lows of just over £13.7 billion to a high of £23.2 billion by the end of 2009.

Karen Barrett, Chief Executive of unbiased.co.uk, comments: “While we may be officially out of recession, these latest figures highlight that consumers are back behaving as they did before the onset of the credit crunch, even though the economy is still not back to full strength.  The credit crunch appeared to have a dramatic ‘shock’ effect on the public, who were jolted into paying off their debts, but it appears this has failed to effect long-term borrowing and savings habits.  There is no indication that we will see an improvement of financial behaviour in 2010. 

“New savings levels have also decreased dramatically over the past three years.  This trend of lower savings levels highlight a real concern for the public’s future financial well-being, especially as these falls in savings levels haven’t resulted in the public paying off an increasing amount of their debts.  With such low interest rates throughout 2009, consumers should be making the most of any spare money they have by paying off debts first.  

“While many believe we are over the worst, there is still a lot of consumer 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.  You can carry out a free and confidential search to find an independent financial adviser near you by visiting unbiased.co.uk.”

-ends-

Notes to editors

*According to independent analysis of the most recent official figures conducted by independent agency, RAKM, on behalf of IFA Promotion.  Data sources are Bank of England, British Bankers Association (unsecured borrowing + equity release, no mortgages), ABI, AIC and IMA.  With detailed queries on this analysis call Paul Hersey on 01737 213867.

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Notes to Editors

Unbiased.co.uk, the professional advice website

Unbiased.co.uk is the free and confidential UK-wide search service matching consumers with the most appropriate local professional advisers for their needs.  In 2008, unbiased.co.uk fulfilled over half a million searches for local, professional advice. 

The portal currently houses three professional advice searches: ‘find an IFA’, ‘find a mortgage adviser’, and ‘find a solicitor’, and is inviting accountants to sign up for its ‘find an accountant’ service.  These searches enable consumers to find relevant professional advisers by postcode, area of specialism and payment method, amongst other options. 

IFA Promotion, the organisation behind unbiased.co.uk, is now in its 20th year, and was set up to promote the benefits of independent financial advice to the consumer. 

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