Advisers warn on borrowing binge

By THIS IS MONEY
Updated:

 

THE savings gap looks set to widen with people borrowing £1.09 for every £1 they manage to save, latest research shows. Britons are developing a split personality when it comes to money, with many thinking of themselves as savers when they are actually borrowers, IFA Promotion, which supports the work of independent financial advisers, said.

The group found that 33% of adults say they are savers, even though they are borrowing money on credit cards or through loans at the same time. It said the annual savings gap, which it estimates to be £66bn, was set to grow further if people continued to cancel out their savings with borrowing.

Overall Britons borrowed £19.6bn during the third quarter of 2002 but saved just £18bn. IFA Promotion said the 'Savings Brake' was now at its highest level since 1990 when people borrowed £1.16 for every pound they saved. It has also nearly doubled since the beginning of 2002, when people took on just 55p of debt for every £1 they saved.

'Borrowing is already cancelling 100% of all new saving, and as the Christmas spending spree inevitably becomes a borrowing bonanza, the savings gap will be wrenched open still further,' said David Elms, chief executive of IFA Promotion. 'It's no use kidding ourselves that if we salt away a few pounds here and there we can go on borrowing like there's no tomorrow - we are urging people to think in a more joined-up way about how much borrowing acts as a brake on closing their personal savings gap.'

The research found that 27% of people are saving money at the same time as paying off non-mortgage debt. Men are more likely to be doing this than women with 31% paying off loans or credit cards at the same time as saving, compared with just 23% of women.

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