Is saving the new borrowing?
Given we are in a (triple-dip?) recession, you would be forgiven for thinking that no-one has got any money. No-one other than the rich, that is. However, new figures from the British Banker’s Association (BWA) suggest that people are being very sensible and are actually putting away any extra money for an even rainier day, to the extent that saving is almost overtaking lending as a National pastime.
BBA figures show that the amount held in savings accounts rose by 6.1% in 2012, despite only pitiful inflation-decimating savings rates being available. Net amounts paid into ISAs totalled £19.5bn, up 70% on the 2011 figure of £11.6bn as people tried to find a half decent savings rate.
Mortgage figures are even more interesting. New mortgage lending reached £92m in 2012, but this was almost matched by £91m of mortgage repayments. However, with the Government’s Funding for Lending stream coming online late in 2012, it may be that 2013 sees an increase in lending as first time buyers gain access to mortgages.
But it’s not just mortgages that are getting paid off. Overall balances on unsecured borrowing contracted by 1.6%, made up of a 5.7% increase in the amount borrowed on credit cards, but personal loans and overdrafts debts falling by 7%.
Howard Archer, chief UK economist at IHS Global Insight, told the Guardian:
"Unsecured consumer credit still remains very low compared to long-term norms, and the impression remains that consumer appetite for taking on new borrowing is limited while there is also an ongoing strong desire of many consumers to reduce their debt.
"Consumers' desire and perceived need to deleverage is clearly the consequence of ongoing serious concerns over the current state of the economy and still heightened worries and uncertainties over the outlook." In simple terms, he thinks we are all too scared of what’s around the corner to take on new debts, and would rather just get rid of our existing ones.
Could it be that borrowing money has become a sensible decision once more? Did you borrow more, save more or pay debts off in 2012? Did you have the money to make that kind of luxury decision?