UK Housing Market Moulds Saving Habits

According to the FT.com, the number of UK households regularly committing part of their income to a savings account has barely increased in the last fifty years. However, the amount of money being saved has increased dramatically from less than £1 billion in 1957 to £43 billion in 2008.

National Savings & Investment says that the increase in the amount of money being saved and the decrease in the number of households doing the saving is due to at least three factors including a move away from cash-based savings, a trend toward keeping money in a savings account for a long period of time, and an increased desire to hunt for accounts with the best and highest returns. NS&I states that the rise in the amount of money being saved is also due to the increasing affluence of those doing the saving.

FT.com says that more than half of all UK households don't save regularly, but the number of households that do has increased from 37 percent in 1957 to 43 percent today. It is thought that the decision to save is based on the age and the lifestyle of the household in question. The closer the people of the household are to retirement age, the more likely they are to commit money to savings on a regular basis.

According to Vicky Redwood of Capital Economics, another reason for the decline in traditional forms of saving is that the UK housing market has been very strong in recent years, particularly in the past ten years. Thanks to the strength of the market, more and more households are saving by taking out a mortgage on their home and prioritizing the repayment of that loan. If the housing market remains strong, the equity they build up in their homes will serve as a non-traditional form of savings or as a pension plan for retirement.

According to NS&I, five percent of the the disposable income of UK savers was allocated to savings accounts last year. It is predicted that if the UK economy begins to falter, the number of households regularly committing funds to savings will increase dramatically. When job security decreases along with housing prices, people tend to place more importance in savings.

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