19 July 2007
Taking out a personal loan to cover the cost of a car or to consolidate credit card debts may be a more attractive prospect in the coming months, as a report by the British Societies Association (BSA) has revealed the affects of the recent interest rate rises are starting to be felt by UK consumers.
According to the latest figures from the BSA, building societies had noted a significant drop in net receipts in June 2007 compared to the same time last year, down from 657 million to 576 million respectively.
While money being put into savings accounts such as ISAs was up on figures for June 2006 to 309 million up from 250 million, the BSA believed this masks underlying seasonal reasons.
Brian Morris, Head of Savings Policy at the BSA said: "In the second quarter of 2007, net receipts into savings accounts at building societies grew by 10.6% over the same period last year. This is partly because of some relatively low levels of saving in the late spring last year, but may also reflect higher rates of interest on accounts following the rises in the Bank Rate.
"However, the inflow in June was 12.3% lower than a year earlier. This suggests that households are finding their finances increasingly tight and that despite the higher rates of interest available, they are having difficulty saving.
"The slow start to the summer has continued. Although 2007 started strongly, it seems the impact of successive interest rate rises is now being felt and is affecting affordability.
"Borrowers should be careful about overstretching themselves at this time of rising interest rates and take on new borrowing only if they are sure they can afford to service it," he warned.