Britons saving themselves from debt

A new wave of realism appears to have swept the nation, with UK residents borrowing less than at any time this century and not slacking on the savings front.

New figures from IFA Promotion show that in the first three months of 2006 Britons borrowed just ten pence for every pound they saved.

This compares to 52 pence for every pound saved at the same time last year.

The organisation, which promotes the benefits of independent financial advice, points out that new borrowing in the first quarter of the year was at its lowest level since 2000.

"The nation appears to be reining in their debt and showing commitment to saving which, overall, is fantastic news to report," said David Elms, IFA Promotion chief executive.

But the headline news might mask a deeper trend.

"At first glance, it seems that consumers have started to develop joined up thinking when it comes to their budgeting behaviour, making the link between their spending, borrowing, saving and long term financial security, but this may not be entirely the case.

"Now is a period of much economic uncertainty and with a rise in interest rates hotly anticipated, consumers are simply behaving in the way you would expect - avoiding taking on new debts and piling what funds they have into savings.

"What we really need to see is a long-term change in people’s budgeting abilities and sustained financial pragmatism"

Repayment of secured debt in January is highlighted as the key driver of this change, but Britons are also taking on less new borrowing.

At the same time savings levels have stayed high for the last six months.

This means the borrowing-to-savings ratio is at historic lows of just ten pence for each pound saved - by comparison in summer 2003 Britons took on £1.28 of new borrowing (not including mortgages) for each pound they saved. XXX