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Category: Debt Date: 3/7/2011
The borrowing habits of Britons have taken a turn for the better after 2010 was revealed to be a record year for consumers repaying their debts.
Overall repayment levels spiked in 2010 at £12,081 million, according to unbiased.co.uk, with consumers seemingly becoming more conscious of their debt levels and wanting to pay off what they owe.
The ongoing strain on personal finances, the volatile economy and market uncertainty have all been put forward as explanations as to why there has been less appetite to take on more debt.
At the same time, borrowing is also being restricted as it has become increasingly difficult for consumers to secure loans.
The research showed that Brits repaid 14p of debt in every pound they saved during the final three months of last year.
Although this was slightly less than the figure of 16p reported in the third quarter, the all time high of repaying 19p in every pound saved reported during the first two quarters meant 2010 overall was a record year.
However, as a result of people choosing to pay off their debts, savings levels steadily dropped during the year.
The amount people put away fell during each quarter of 2010.
The year started off with almost £20 billion of new savings in the first quarter, but this had dropped to just over £15 billion by the fourth quarter, an overall fall of 20%.
The website said it appears the low interest rate environment has been discouraging savers, resulting in more of them instead choosing to pay off their debts.
"Brits' borrowing habits returned to better health throughout last year and it is encouraging to see the trend for debt repayment increasing in 2010 compared to 2009," said Karen Barrett, chief executive of unbiased.co.uk.
"However, debt repayment levels have tailed off towards the end of last year, therefore it will be interesting to see how this will develop during 2011.
"As the cost of living increases and with higher taxes on the horizon, combined with continuing low interest, we will see an effect on consumer savings habits and our figures already show overall savings levels have steadily fallen over the past few years.
"This trend highlights a real concern for the nation's personal finances as we see people dipping into what is essentially their financial safety net."
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