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Consumers pay down debt over savings

Tuesday, October 09 10:10:48

Irish consumers are increasingly opting to pay down debt rather than stashing money away for the future, the latest Nationwide UK (Ireland)/ESRI Savings Index shows.

The index increased 2 points in September despite increased negativity towards the saving environment and an increasing propensity to pay down debt rather than save surplus cash.

The Savings Environment sub-index declined 9 points in September to 90, its lowest recorded level since the 2010 Budget was announced.

The source of the decline is a fall in the proportion of people who believe that now is a good time to save. In September, only 25pc believe that now is a good time to save, compared to 34pc last month and 37pc this time last year.

There has also been an increase in the number of people who think that now is a bad time to save to 47pc from 40pc last month and 33pc a year ago.

The survey found that 54pc of consumers would use surplus cash to pay down debt including their mortgage - an increase from 51pc in August. Only 7pc would spend surplus cash down from 8pc the previous month.

The overall Savings Index increased 2 points to 97 despite the decline in the Savings Environment sub-index. This is due to a 13 point increase in the Savings Attitude sub-index. The increase is driven by the continuation of a consistent trend in this sub-index during 2012.

While fewer people are saving regularly, there has been an upward trend in the proportion of people who say they are happy with the amount they are saving which now stands at 16pc. This compares with 13pc last month and this time last year.

The percentage of savers who report that they are saving less than they should remains high at 60pc but this has declined from 66pc a year ago and 65pc last month. 77pc remain positive about their ability to maintain their level of saving over the next six months while 9pc expect to be saving more.

Commenting on the Index, Brendan Synnott, Managing Director of Nationwide UK (Ireland) said "Savers are very aware of the returns they are getting for their deposits and following a recent further decline in savings interest rates, we are now seeing an increase in the proportion of people who will use spare funds to pay down debt rather than choosing to save." A core insight from the index this month is that people who can save, believe they have made the necessary adjustments to their savings and spending patterns. Two years ago over 70pc of people said they were not saving enough, now this figure is at 60pc. At the same time, 16pc of people now say they are saving more than they think they should, up from 11pc two years ago."