Savings rise as borrowing falls

Britons are saving cash rather than borrowing it, building societies have revealed.

Building societies received £1.4 billion in July 2008 of savings in July – double the £723 million saved last year, the Building Societies Association (BSA) said.

Adrian Coles, director-general of the BSA, said: "A turbulent stock market and greater anxiety over job prospects mean that people are increasingly viewing their tried and trusted building society as an excellent home for their money.

"They know that saving with a society ensures they can take advantage of a competitive product range with a name they can rely on."

Although building society net withdrawals from cash ISAs in July 2008 were £228 million compared to net receipts of £167 million in July 2007, overall, consumers are saving more than they are withdrawing.

Building society gross lending amounted to £3.3 billion in July 2008 compared to £4.4 billion in July 2007.

Building societies have been more conservative in their lending policies, the BSA said, reducing the amount of mortgage business they have undertaken.

Both banks and building societies have been encouraging customers to save with high-interest accounts and discouraging them from taking out mortgages by requiring higher deposits.

The Bank of England said today that mortgage lending in July hit a new low, falling to £14.6 billion, less than half the £31.4 billion borrowed in July 2007.