Household savings will be worth more than £1 trillion for the first time in 2007 as Britons galvanised by debt warnings start saving more, HBOS forecasts.
The banking group anticipates that savings in deposit accounts will rise by nearly £70 billion and that the percentage of disposable income saved rather than spent – the 'savings ratio' – will rise to 6.2 per cent in the last quarter of 2007.
The average savings ratio over the last five years has been five per cent but hit an all-time low of 3.1 per cent in the second quarter of 2005.
"Households are rediscovering the savings habit," commented Martin Ellis, HBOS chief economist.
"More caution in terms of borrowing has led to households saving more."
Two interest rate rises have helped curb consumer profligacy while another predicted rate rise in February should help to tighten borrowing and spending habits, HBOS predicts.
David Miles, the chief UK economist at Morgan Stanley, agrees.
"Our best guess is that household savings will move up from here," he told the Independent.
Higher interest rates, he noted, simply reinforced "an increasing realisation by many people that the increase in life expectancy means that they must save more".To compare savings accounts, click here.
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