In response to the latest dip in the financial market, British people are taking a break from putting all their expenses on their debit and credit card loans and are instead reaching for their savings and using that cash instead. This seems to be ultimately due to rising inflation and the low growth of salaries. There is also a reduced pace of people borrowing money from high street banks suggesting that people are more and more concerned about lending money. How can you make the most of this bad situation in terms of your family’s savings?
The reality for saving accounts
Mohammad Jamei, senior economist at UK Finance, said: “It seems households are saving a bit less each month rather than borrowing more.”
Figures in June showed that households were saving less than at any time in the past 50 years.
The data from UK Finance comes a day after the Bank of England’s financial policy committee said that banks had underestimated the losses they could incur on unsecured loans if there were another financial downturn. The FPC ordered banks to set aside a further £10 billion to shore up their balance sheets to protect Britain.
Wider data collected by the Bank of England showed unsecured consumer lending growing at an annual rate of 9.8 per cent in July, down from an 11-year high of 11 per cent at end of 2016.
Reduction in growth
Growth in the economy since the Brexit vote has been driven by household spending; trade exports and investment have made little contribution. This means that the wider economy could slow if consumers borrow less.
UK Finance also showed that the number of mortgage approvals rose in August to 41,807 from 41,644 in July. Approvals were 12 per cent higher than in August 2016. However, the monthly rise was largely driven by a 5.3 per cent increase in remortgages. By contrast approvals for house purchases rose by only 0.4 per cent month on month.
The Royal Institution of Chartered Surveyors has reported that buyer inquiries have been flat or have fallen in each of the past seven months.
Income squeeze hits big purchases
A third of households have postponed buying big-ticket items in the past year (Patrick Hosking writes).
With real incomes falling, 33 per cent of households have delayed purchases of expensive items such as cars, furniture, home improvements and televisions, according to a study by Scottish Friendly. Almost four fifths of those putting off purchases said that they did not have enough money to spend on them. The other fifth cited uncertainty over prices as the main factor.
The quarterly report, compiled in conjunction with the Social Market Foundation, found that four in ten households felt worse off than a year ago, while 82 per cent said that their financial situation was not improving.
Calum Bennie, savings expert at Scottish Friendly, said that pessimism about the prospects for personal finances was taking root. “We seem to be stuck in a rut of economic uncertainty,” he said. “The country is anticipating the outcome of Brexit negotiations and the impact this will have on the wider UK economy.”
Big ticket items are often the first to feel the affect of a slowdown because they are frequently bought on credit and because they are usually non-essential.
Are you concerned about your own saving account and what the changes to inflation will mean for your family? We can help put you into contact with organisations that can give you free, independent advice. Get in touch with us via our contact page and we will try our best to help you.