Consumer Borrowing Ups Savings Break Index

by Gill Montia

Story link: Consumer Borrowing Ups Savings Break Index

Unbiased.co.uk, which operates a website providing independent financial advice, has published a report showing a strong increase in UK consumer borrowing during the first quarter of 2007. In the three months to the end of March the value of secured and unsecured debt taken-up increased to almost £15 billion, representing an increase of almost £100 million on the previous three months. According to Unbiased, personal savings declined during the period; at £37 billion, the figure was down £6 billion on the fourth quarter of 2006.

As a result, the Savings Break, a term used to describe the ratio between how much consumers are borrowing (not including mortgage debt) and how much they are saving, increased to 41 pence borrowed for every pound saved. In the previous quarter the Savings Break stood at 35 pence and the average for 2006 was 36 pence.

Additional data recently released by Scottish Widows shows that only 49% of people are saving adequately for their retirement, while 24% are saving nothing at all. Women, the self-employed and people in debt are amongst those least likely to be saving for later years.

Since 2003, when interest rates stood at 3.5%, personal debt in the UK has increased to over one trillion pounds. However, the cost of borrowing is now at its highest in six-years, at 5.5%. As a result, personal bankruptcies are at record levels and home repossessions are increasing.