Diminishing Saving And Record Personal Debt

[Gromit]

Two pieces of news recently show that people are withdrawing their savings in record numbers and that personal debt has doubled and the average household debt is £54,000.

// Savers have been withdrawing money from their accounts at the fastest rate for nearly 40 years, Bank of England figures show.
They took £23 billion out of long-term savings in the past 12 months, equivalent to £900 for every household in the country. //

http://www.telegraph.co.uk/finance/personalfinance/savings/10489947/Savings-drop-to-lowest-level-in-40-years-Bank-of-England-figures-reveal.html

// The Centre for Social Justice, the think tank founded by Iain Duncan Smith, the work and pensions secretary, warns that families are falling into a "debt trap that is proving very difficult to escape” 

Household debt has doubled in the last decade as rising numbers of families fall into a borrowing “trap”, an influential think tank warns.
British households now owe an average of £54,000, an increase from £29,000 a decade ago, according to a report by the Centre for Social Justice. //

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10460366/Average-household-debt-doubled-in-last-decade.html

What does this mean?

[ludwig]

My guess - A combination of people being hard up and having to fall back on savings, plus the fact that interest rates are so low it's not worth having savings, plus a general lack of confidence in the security of financial institutions since 2008 - amongst other things.

[ludwig]

^ Just realised I only addressed the savings point. As regards borrowing, we've been addicted to it for ages. As long as credit is available, people will access it. The culture of saving for something and then spending is long gone.

[jake-the-peg]

I'm not convinced the two are linked or at least not strongly linked

With interest rates below inflation why would anybody save money in a bank?

Your money is worth less in real terms every year it's in there

[sunny-dave]

The unsayable elephant in George Osborne's room (sorry that's a horribly mixed metaphor) is that he would actually like us all to get out there and spend our savings to stimulate the economy - but he can't actually encourage that because it is directly contrary to the 'save for your old age' mantra that the rest of the government is constantly reciting.

So he drops interest rates to a pittance, nudges inflation up with a load of quantitative easing and Bob's Your Mother's Brother ... people think "stuff it I may as well spend it" and Gideon gets what he wants without seeming to break the party line ....

[Gromit]

Because interest rates are so low, Record numbers are putting their money into Premium Bonds. So much so that they are actually raising the Government more money than it wants.

So in August they cut the number of winners and the prize fund dropped from £58million to £49million.

[Zeuhl]

This is a natural consequence of a record low in Interest Rates

Increasing a mortgage is a source of cheap money
Money in a 'savings account' is doing nothing

so no surprise borrowing further to buy more properties and renting them out is so popular

[Zeuhl]

/So much so that they are actually raising the Government more money than it wants. /

True

My firm has worked with NSI in the past.
The have stopped nearly all their product marketing because they have exceeded targets and were screwing up the Treasury's figures

[boxtops]

I'm not surprised at all

a) we dip into our savings to be able to afford to live
b) many people don't have savings, so they have to borrow to live

[youngmafbog]

//So he drops interest rates to a pittance,// No he didnt. Gordon Brown moved this out to the Bank of England. GO has never moved it back.

With lower interst rates those who were living off their saving interet can no longer do it. So the choice is leave it there and dip into the capital or take it out and move it into something else. I'm not sure it naturally follows it will move into houses to rent out. This is not a easy as it seems and many wont have enough to do it or the inclination to take on what can be a major hassel. There are other ways though.

Mind you, I can just imagine the outrage on her if the BoE do raise the interest rate, which they will shortly I would suspect.

[Gromit]

Ymb

Interest rates may not move soon because of Zombie Companies. A rise in rates will kill many ailing companies and push up unemployment.

// Thousands of companies have subsisted through the downturn thanks largely to accommodating bankers and very low interest rates. As the economy gathers pace, some will recover and flourish, but the weakest of these "zombie firms" will find that competition and a shortage of cash spells the end.

More than a million people are employed by businesses showing signs of acute distress, according to the Association of Business Recovery Professionals, R3.

If recovery does kill off the weakest, that may mean unemployment gets worse before it gets better, which in turn may be a cue for the Bank of England to keep interest rates lower for longer, casting its forward guidance in a new light. //

[DrFilth]

> What does this mean? <

the country is fluffed all the industry has been moved abroad what we are left with is small units with people on the minimum wage which is all the boss has to pay as there are plenty walking the streets looking for work

typical tory lies that unemployment is down, they stop people signing on so it makes it look like less are signing on. people will use up their savings then they will get into debt to survive.

once in debt it is hard to get out