Brits reduce savings as credit crunch starts to bite

Consumer borrowing soared by £22.4 billion in the first quarter of 2008, £13 billion higher than during the same period in 2007, according to figures from Unbiased.co.uk, the Find an Independent Financial Adviser Search.

Unbiased.co.uk's Savings Brake research, which reveals the ratio of how much we are borrowing, not including mortgage debt, contrasted with how much we are saving, shows that for every pound UK consumers saved during the first three months of 2008, they borrowed 69 pence. This is a notable increase from the 29 pence borrowed against every pound during the first quarter of 2007.

The research also reveals that as well as increasing borrowing levels, consumers also reduced savings - with the amount we added to our ‘rainy day' funds dipping by £11 billion to £32.7 billion in quarter one 2008.

David Elms, Chief Executive of Unbiased.co.uk, commented: "2008 has started turbulently for many with regards to their finances. 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. We have increased our debt two fold since the same time last year - and reduced our savings.

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 Over 10,000 mortgage deals have been withdrawn and personal loans are more expensive than last year - making it harder for people to find affordable credit.

"We need to take control and start managing debt better and putting some money away for the future if we are to see a significant improvement in the Savings Brake ratio in 2008. 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."

To take control of your spending and borrowing, visit unbiased.co.uk/getsaving to download your free copy of Unbiased.co.uk's dedicated guide - Join the Savings Revolution - which looks at how you can budget to save more, and options of where to put any extra money. You can also obtain details of local independent financial advisers to talk though the most suitable savings options for you by visiting unbiased.co.uk/getsaving.