Consumer savings levels drop

As green shoots of an economic recovery emerge research from Unbiased.co.uk, the professional advice website, reveals that consumer savings levels have fallen once again in Q3 2009.  These dropped by £6billion to £13billion in Q3 2009, compared to the 2009 high of £19billion in Q2 2009.

More worryingly, debt levels have not decreased with the dramatic drop in savings levels, with them dipping only slightly in Q3 2009 to £4 billion.  This is only a £1 billion drop from £5 billion in Q2 2009.  Debt levels are still almost double what they were at the beginning of the year.

Unbiased.co.uk's Savings Brake research reveals the ratio of how much we are borrowing (excluding mortgage debt) contrasted with how much we are saving.  As a nation we are now borrowing 31p for every pound saved.  This is an all time high for 2009, increasing from borrowing 27p for every pound saved in Q2. 

This is a stark contrast to the second half of 2008, which saw consumers fight the recessionary doom and gloom by concentrating on clearing their debts, with £1.61 of debt repaid for every pound saved.

Karen Barrett, Chief Executive of Unbiased.co.uk, comments: "After the dramatic retreat from savings in favour of paying off personal debt in the first half of 2008, consumers are now slipping back into old habits, by borrowing around a third of what they save.  While our year on year data shows that this is reasonably good for a normal economic cycle, with savings levels currently billions lower than they were back in 2006 and 2007, this is creating a serious barrier to a sustained economic recovery.

"With the interest rates at 0.5% over the past nine months many consumers are unsurprisingly confused and at a loss as to how they can make their savings work hardest for them.  It is therefore vital for consumers to keep a close eye on savings rates and seek advice from an independent financial adviser, who can search the whole of the market, for the best deals for their personal financial situation.  Only an IFA will be able to help you strike the best balance between borrowing, saving and other financial investments."

You can carry out a free and confidential ‘find an IFA' search at Unbiased.co.uk to find a local, whole of market adviser who will be able to talk you through the most suitable savings options for you.