Consumers Paying Off Loan Debts Rather Than Saving
There has recently been a shift in behaviour patterns amongst consumers in the UK, with regard to their financial matters.
According to the latest figures from the Building Societies Association (BSA), a large number of individuals are now choosing to repay their debts on personal loans and credit cards, as opposed to saving the money in a bank or building society savings account. It is quite probable that many people have had a wake up call during the recent recession, which has prompted them to reduce their personal loan and credit card debts, in order to lower their regular monthly commitments.
Coupled with this, is the fact that a growing number of individuals no longer trust banks with their savings and therefore choose to use the funds elsewhere.
Although there has been a steady increase in the number of homeowner loan applications since the start of the year, this is still at 57 per cent lower levels than the number of loan approvals at the same time last year. Meanwhile, there has been a net withdrawal from building society savings accounts of around £494 million, as people either stop their regular savings, or withdraw cash from their accounts to repay their loans.
Adrian Coles of the BSA said “While the mortgage market appears to have recovered slightly from the start of the year, levels of activity remain depressed. There is evidence that households are looking to repay debt rather than save and it is possible that there will be a net withdrawal from the total UK savings market in 2009. Overall, building societies offer attractive savings accounts that are trusted by savers. As a result, societies have attracted substantial inflows since the financial crisis began.”
