Savings continue to fall as consumers opt to repay debt

Figures published today show that people in the UK continue to repay debt as the incentive to save remains low in the current historically low interest rate environment.

According to the Building Societies Association (BSA), its members withdrew more money than they saved for the ninth consecutive month in November.

The BSA said there was a net withdrawal of £775 million during the month as consumers opted to pay off debts.

Commenting on the figures, Adrian Coles, director-general at the BSA, says: “There is little incentive for people to increase savings whilst the Bank rate remains at its current low level, and many may opt to repay debt instead.

“Building societies and other deposit takers are also facing heightened competition from institutions with a government guarantee, which is creating further distortions in the savings market,” added Mr Coles.

The figures came as the Bank of England revealed that the number of mortgages approved for house purchase rose for the twelfth consecutive month in November.

Mortgage approvals for house purchase grew to 60,518 in November, up from the 57,718 in October and represented the highest level since March 2008.

Meanwhile, credit card lending saw a marginal rise in November but other loans and overdrafts continued to fall reflecting the consumer’s reluctance to take out loans for big-ticket items, such as cars.

Finally, the Bank of England figures showed that consumers repaid unsecured debt for a fifth consecutive month but the £376 million repayment was much less than the £591 million repaid the previous month.

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