Substantial Increase in Household Saving as Recession Bites

New figures from the Office for National Statistics show people are saving more as the recession bites – even though the Government wants people to spend more in order to stimulate the economy.

The proportion of household income being saved in the UK rose from a negative figure in the first three months of 2008 to reach 4.8% by the final quarter, resulting in the highest ‘savings ratio’ since 2006.

According to George Buckley, an economist at Deutsche Bank:

“On the face of it this rise is good news - it means that a large portion of the necessary rebalancing of the economy away from spending and towards saving has occurred already.”

The savings ratio has also been boosted by people borrowing less, with a slump last year in the number of new mortgages, and consumers reining in their spending on credit cards and other types of borrowing. It has also been aided by the drop in Bank of England interest rates since last Autumn which has dramatically lowered the cost of many existing mortgages. 

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