Continued low interest rates for savers is leading more people to repay debt rather than topping up savings, according to the Markit UK Household Finance Index.
The poll highlighted that September was the eighth consecutive month where lower levels of debt have been recorded, suggesting that many householders feel they may have to face further economic hardship in the future and are paying off debts while they can.
Markit economist Tim Moore said: “Concerns over pay and job security remain at the forefront of people’s minds, while stubbornly high inflation and an impending VAT rise are becoming increasingly difficult to ignore. Those working in the public sector reported the greatest degree of pessimism, perhaps because of a sense of unease ahead of next month’s government spending review”.
He continued: “Households have responded to the uncertain outlook by paying down debt, reining in their appetite for unsecured credit and delaying major purchases”.
Other research by Lloyds TSB found that saving was at its highest in 2006 but fell considerably during the economic crisis.
Suren Thiru, economist at Lloyds TSB, said: “The substantial rise of new household savings over the past 10 years reflects the extent to which savers have worked hard to build their nest-egg”.
However, he continued: “The level of new households’ savings has weakened somewhat over recent years as a consequence of the financial crisis”.