Savings levels plunge as Brits rush to repay debt

As economic reports warn of a double dip recession, Brits are returning to repaying their debts, a behaviour last seen at the beginning of the financial downturn. Latest figures from unbiased.co.uk reveal Brits have let savings nose-dive and reverted back to repaying more debt than they're borrowing, a trend last seen in Q4 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.

Over the second quarter of this year, Brits repaid £1 billion over and above what they were borrowing - which equates to consumers repaying 7p of debt for every pound they saved.  This is in stark contrast to the final quarter of last year, which saw Brits adding £16 billion to the debt mountain as they borrowed 66p for every pound saved.

The figures also reveal how Britain's savings levels seem to be the victim of this rush to repay debts, falling by nearly £8 billion over the second quarter of 2010 compared with the first quarter - from £23 billion to £15 billion.

Karen Barrett, Chief Executive of unbiased.co.uk, comments: "Brits appear to have shifted their financial habits to reflect those last seen at the height of the credit crunch, with debt repayment top of the priority list.  For the first time since 2008, consumers are now paying off more debt than they're borrowing - however this has inevitably also resulted in a drop in savings levels.

"For those who are in a position to save, no matter how little, it is important to ensure you are doing whatever you can to make your savings work hard - especially as interest rates remain static.  In order to ensure you are making the right choices with your finances, it is vital to seek professional advice from an IFA.  An IFA can advise you on striking the best balance between borrowing and saving, as well looking at your overall financial position and recommending products from the whole of the market to guide you through.  

"You can carry out a free and confidential search to find an independent financial adviser near you by visiting unbiased.co.uk."