Consumer borrowing booms as savings shrink
Consumer borrowing has spiked due to the cost-of-living crisis, with 12 per cent of people forced to take out more debt, new research has found.
The Office for National Statistics released its Public Opinion and Social Trends data to 1 September today (16 September).
18 per cent of people surveyed said they had to use savings to cover living costs in the previous week, while 82 per cent are somewhat or very worried about the rising cost of living – up from 74 per cent in May.
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“Our savings are vanishing, as rapacious inflation devours any financial resilience we managed to build during the lockdowns,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.
“One in five have been forced to eat into their savings to pay the bills, while one in six are watching its spending power be consumed by inflation. And when any savings are finally exhausted, we’re being forced to borrow.”
Even those who are managing to avoid dipping into savings are watching the spending power of their money disappear as savings rates fall behind inflation, Coles noted.
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“It’s just not possible to keep pace with inflation in any savings account at the moment, but that doesn’t mean you should resign yourself to a miserable high street account paying a fraction of one per cent,” she said. “There are competitive easy access deals paying over two per cent, and if you can afford to tie some of the cash up for a few months or even a year, you could make up to 3.4 per cent.”
The Bank of England base rate currently stands at 1.75 per cent following a 0.5 per cent rise at the August meeting. Inflation is currently 9.9 per cent.
