New consumer borrowing has hit a four year high, as debt levels increased again in Q1 this year by £22bn, while savings rates fell by £11bn, according to research by Unbiased.co.uk.
Its Savings Brake research, which reveals the ratio of how much Britons are borrowing (excluding mortgage debt) contrasted with the amount consumers are saving, shows that for every pound saved during Q1 2008, 69 pence was borrowed.
This is a notable increase from 29 pence borrowed against every pound, during Q1 last year. First quarter borrowing is £13bn higher this year than last, despite the credit crunch, the research found.
As well as increasing borrowing levels, consumers also reduced savings as the amount added to “rainy day” funds dipped by £11bn to £32.7bn in Q1 of 2008, Unbiased says.
"2008 has started turbulently for many with regards to their finances. Consumers are playing double jeopardy - not only increasing the amount they are borrowing, but also reducing the amount they are saving,” comments David Elms, chief executive of Unbiased.co.uk.
He says the early months of the year have traditionally shown British consumers to be at their most financially stretched but the scenario is even more bleak than normal.
"A bad situation is being made worse by the fact that as the credit crunch bites, there is less credit around. Over 10,000 mortgage deals have been withdrawn and personal loans are more expensive than last year - making it harder for people to find affordable credit.
"We need to take control and start managing debt better and putting some money away for the future if we are to see a significant improvement in the Savings Brake ratio in 2008. It has never been more important for people to take control of their finances to ensure their savings and borrowings remain at a healthy level."
The Savings Brake was calculated using independent analysis of recent figures conducted by RAKM for IFA Promotion. Data sources were the Bank of England, British Bankers Association, ABJ, AIC and IMA.IFAonline
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