Credit, collections & insolvency news
Household saving ratios continue to climb upwards as more seek to take advantage of higher interest rates, but many are still challenged by their ability to find the right balance between saving and spending.
Recent months have seen a gradual increasing of the ratio at which UK households are saving and while a positive sign, other figures indicate the picture is more complicated. In Q1 2024, the household savings ratio reached 11.3%, this is the highest the ratio has been since Q2 2021 (11.9%), although still well below the Q2 2020 level of 27.3%, which was heavily inflated by the effects of the pandemic and lockdown.
However, while this rate is and has been increasing, it is estimated that 39% of individuals aged between 22 and the State Pension age are under-saving for retirement. If people are beginning to save more, but with less of an eye on their later life, this could indicate that the sharp financial shocks of recent times have moved people’s financial perspective to more immediate options, ensuring a healthy buffer for any short-term shocks, rather than longer-term financial planning.
The significant challenge entailed in achieving one of the most common financial savings goals, affording a deposit on a house, further illustrates this. In May 2024, the average first-time buyer deposit was around £44,812, which is 125.1% of the average UK salary. According to the Skipton Group’s Home Affordability Index, from the top 25% of UK earners, only 44% of these would be able to purchase their first home in the area in which they currently live. For those with mortgages, the average UK mortgage debt per adult is £34,537 around 96% of average earnings.
These factors inevitably impact on people’s spending choices and in Q1 2024, household daily spend on utilities was down compared to Q3 2023, although this was only a fairly minor change equating to £1.12 per month. At the same time, housing and utilities saw the lowest rate of inflation in the year to June 2024 at -4.7%. Typically households would cut down on spending in order to put more aside for savings goals or security, but in the current times, even this may not be a goal many are able to achieve.
Engaging with savings as a regular and planned habit, whether it’s a lot or very little, has always been a cornerstone piece of Financial Wellbeing and part of what we communicate in our Workshops and Webinars. Whether it’s saving towards the longer-term in life, a medium-term life goal or just ensuring you have enough to be covered in the immediate, in good or bad unexpected circumstances, these are all healthy parts of helping people to be comfortable with their finances.
After the considerable growth we saw in savings during the pandemic, the size and relentless nature of the financial shocks society has since gone through have taken a heavy toll on this progress. There remains much to be done but, as has been the case recently, this month’s figures again show some green shots of what we hope is the recovery of many household budgets towards a firmer and more sustainable financial footing.
