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People opt to pay off debts rather than save

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by Kay Mitchell

According to the latest Markit UK Household Finance Index, people are continuing to pay off their debts rather than top up their savings.

This has been the case for some time now as historically low interest rates discourage consumers from saving.

Meanwhile, the survey of 1,500 households discovered that around 27% of those questioned saw their household finances deteriorate in September, compared to just over 7% that recorded an improvement.

The survey also showed that lower levels of debt had been recorded for the eighth consecutive month.

The survey suggests that UK households are braced for massive spending cuts, introduced by the Government to slash the budget deficit.

The forthcoming VAT rise, as well as stubbornly high inflation, are on many consumers’ minds, according to Tim Moore of Markit.

He says: “Those working in the public sector reported the greatest degree of pessimism, perhaps because of a sense of unease ahead of next month’s government spending review.

“Households have responded to the uncertain outlook by paying down debt, reining in their appetite for unsecured credit and delaying major purchases,” he concluded.

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News posted: September 27, 2010

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