Homeowners ‘Feel Pressure’ Of Interest Rate Rises

Britons are raiding their savings accounts in an attempt to supplement overspending in other areas of their finances, new figures reveal.

Research carried out by Birmingham Midshires showed that although the three interest rate rises carried out by the Bank of England so far this year, in addition to speculation of further increases, have seen less people look to take out cash from savings accounts over the last three months in comparison to the final quarter of 2006, a higher proportion of cash has been taken out. According to the company’s Saving Britain report, consumers took an average of 400 pounds from their financial hoards to help meet various expenses such as increased living costs and to service debts accrued on credit cards and secured loans.

Commenting on the findings, Jason Robinson, director of savings operations at Birmingham Midshires, said: “While homeowners are feeling the pressures following Bank of England rate decisions, there has never been a better time for people to put away their money. Interest rates at a six-year high mean great returns for savers, whatever amount you can afford to put away.”

Research from the financial services firm also revealed that, in addition to facing the highest cost of living in the country, those living in London are the most likely to dip into their savings accounts as consumers in the capital withdrew a typical amount of 716 pounds over the last three months. This dwindles in comparison to people in the north who took out some 242 pounds.

Overall, a quarter of Britons were said to have gone into their savings as a consequence of spending too much money from their current account or other areas of their finances. However, it was suggested that young people are”most likely to feel the bite” on their monetary situation during the past three months as more than a third (37 per cent) of 25 to 34-year-olds have used cash intended for a rainy day to make up for frittering away too much money in other areas. Meanwhile, 14 per cent of people in this age bracket look to raid their savings as a way of funding the purchase of gifts and luxury items. Just less than a fifth (18 per cent) had opted to raid their accounts as a way of financing a holiday.

However, it was the over-55s who were shown to be the worst “raiding offenders” as over the last three months they have withdrawn an average of 682 pounds, in comparison to the 151 pounds taken out by Britons under the age of 30. Some 23 per cent had taken money from their account to help pay for a trip away while 14 per cent used it to pay off unexpected bills.

For those concerned that they are taking too much money out of their savings accounts, opting for a low-rate loan could well be an advisable way in which to consolidate debts and other areas of financial pressures into a more manageable situation. However, in research conducted by Combined Insurance less than a quarter of adults were shown to be not putting money into savings schemes, as two-thirds of consumers saw their utility bills increase last year. In turn, director Nigel Brittle suggested that the nation is increasingly living on a financial “edge”.