Debt levels increase sharply as credit crunch takes its toll

With the credit crunch in full swing, consumer borrowing has shot up to £5.9 billion in the second quarter of 2008, according to figures from Unbiased.co.uk. This marks a whopping £757 million increase compared to the same period in 2007.

At the same time, consumers' savings levels have dropped by £4 billion compared to 2007. The amount we added to our ‘rainy day' funds has dipped to £38.5 billion in quarter two 2008 from £42.9 in quarter two in 2007.

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 quarter two 2008, they borrowed 15 pence. This has increased from 12 pence borrowed against every pound during the second quarter of 2007.

David Elms, Chief Executive of Unbiased.co.uk, commented: "With the credit crunch firmly gripping financial markets, it is now more important than ever for consumers to take control of their finances. People are currently feeling the pinch - but this will only continue to get worse if they are both increasing the amount they are borrowing and reducing the amount they are saving.

"It is crucial that people take action now and make sure that they are taking control of their finances. Reigning in on spending and making sure that your savings are working hard for you are only the start of kick starting your finances. And hopefully we will be able to see a healthier Savings Brake ratio for the remainder of 2008."

To take control of your spending and borrowing, visit unbiased.co.uk 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 through the most suitable savings options for you by visiting unbiased.co.uk