Savers are putting more money away for a rainy day for the first time in 20 years, according to the Bank of England.
A new report shows that families put £24 billion into deposit accounts last year but only took out £20 billion in loans. This means that for the first time since savings records began in 1988 savers put away more than they borrowed.
Research by the Office for National Statistics also showed that total savings, including investments and pensions, increased last year from two per cent of household income to seven per cent as families braced themselves for hard times.
Speaking to the Telegraph Peter Spencer, the chief economic adviser to the Ernst & Young ITEM Club, said: “People are reducing their borrowings. It’s the combined effect of some families not being able to get credit and other families choosing to pay their debts off.”
The Bank of England’s report showed that savers are still getting a good deal despite the base rate sitting at a historic low of 0.5 per cent for the 14th month running.
David Hollingworth, of mortgage brokers London & Country, added: “There’s been a complete turnaround in the approach of borrowers. Rather than using mortgages as a cheap way of borrowing – effectively using their home as a piggy bank to fund their luxury purchases – they are now looking to pay down debt more quickly. They are tightening their belts amid concerns about higher interest rates in the future and questions over the employment market.”
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