Consumer debt is still out of control!
Alexander Burgess is a director at British Money
Consumer Association Which? reports 18 months ago homeowners were dipping into savings to pay for large items or holidays, now they use their reserves to pay for essentials such as food and household bills.
Savings, it appears, are way down the priority list. The N & SI Quarterly Savings Survey says Brits save an average of £101.66 per month, one in five – 20% – have under £1000 in savings and 16% have nothing at all.
Comparison site GoCompare believes the figure is more likely to be 25% without savings and a third reliant on credit cards in an emergency.
Those who set aside funds for a ‘rainy day’ now consider shopping, high bills, rent and mortgages as justified reasons for dipping into their savings pots.
Years ago the pot would only have been raided for unexpected household repairs.
Borrowers have always been advised to set aside at least three months’ worth of mortgage payments, as a financial cushion, yet with the comparison site confirming savings pots currently total around £1000, it’s just enough to cover one month’s average mortgage payment. A rate rise will eat into this.
VocaLink, the company processing salary payments for more than 90% of our workforce recently announced workers’ wages increased by just 8 pence in the three months leading up to September this year, when compared to the same period in 2013.
Working with the Centre for Economics & Business Research, it found employees working for Britain’s biggest 350 firms took home an average wage of just under £1,534 in September.
Workers in the services sector lost an average of £1.43 from their monthly pay packet, receiving £1,509 a month and public sector employees are down £11.12 per month, taking home £1,586.
With average monthly mortgage repayments between £850 and £1,000, it’s not surprising so few borrowers are able to save; sluggish salaries and increased household expenditure do not encourage a savings culture.
Recommendations, rather than solutions are being proposed. And this is the issue; no one has come up with a solution to prevent indebtedness. The onus is on dealing with debt after it’s been allowed to spiral out of control.