New figures from Unbiased.co.uk, the online ‘Find an Independent Financial Adviser' search show that the credit crunch is finally hitting home and worried consumers are taking drastic actions to reduce their debt mountain.
During the third quarter of 2008 consumers paid off over £23 billion more in debt than they took out in new borrowing. But according to the research, paying off the nation's debt comes at a price - as it seems Britons are sacrificing their savings to get out of the red. Savings levels almost halved over the last quarter to an all-time low, from £38.5 billion in quarter two of 2008 to £19.3 billion in the third quarter - a reduction of over £19 billion.
These latest figures mark a first in Unbiased.co.uk's eight-year Savings Brake* research, which reveals the ratio of how much we are borrowing, not including mortgage debt, contrasted with how much we are saving. For the first time since the study began, Britain is focusing on paying off debt rather than taking out new debt. For every pound UK consumers saved during the third quarter of 2008, they also paid off £1.24 of their debt. This is a huge contrast to the second quarter, where for every pound saved, the nation borrowed 15 pence.
David Elms, Chief Executive of Unbiased.co.uk, commented: "2008 has been a turbulent year in terms of finances and these figures are unprecedented. Britons appear to have taken drastic actions in an attempt to reduce their debt levels. For the first time in our research the nation has actually focused on paying off debt rather than accumulating even more.
"But like everything, this trend has left its mark on consumer finances. With such a focus on paying off debt, the UK savings levels felt the repercussions and dropped to an all time low.
"Especially in the current interest rate environment for many people the decision on whether to prioritise their savings or service their debt can be a difficult one to make. An Independent Financial Adviser (IFA) can help with this decision and make sure people make the best choices for their personal finances not just in the short term but also with long term goals in mind."
