By Kate Brown
For the first time since data records began in 1987, the Office for National Statistics (ONS) stated that last year UK households became net borrowers. Households typically become net borrowers if the amount of debt they are building exceeds the amount they are depositing in bank accounts.
Meanwhile, figures also show that savings are at their lowest annual level since 1963. The ONS said that the amount UK households managed to save out of their disposable income fell to 4.9% last year. Before 2017, the last lowest annual level of savings was reported at 5.2% in 1971.
The trend is said to illustrate the effect of budget pressures on families and low interest rates. Low wages are outlined as an additional reason why UK households are more likely to borrow, with no disposable income available for saving. However, those who are able to save have been said to be potentially delaying any deposits into savings accounts in anticipation of an interest rate rise by the Bank of England later this year.
A spokeswoman for the debt charity StepChange said: “far from being a nation of savers, we’re now a nation of borrowers. If we could shift that balance a bit, especially for lower income households, we could improve the financial wellbeing of many households and prevent many experiencing problem debt”.
According to the Money Advice Service, households should have at least three months’ essential outgoings in an emergency savings account with instant access. For example, if monthly outgoings amounted to £1,000, households should have £3,000 accessible in emergency savings. However, a recent survey by ING found that more than one in four households have no savings they can quickly access.
Full-time workers need a 62% pay rise to afford a mortgage
Middle-income earners show decline in home ownership
Emergency savings – more than 1 in 4 households don’t have them