Soaring prices force people to spend savings on mortgages, food and electricity

11 July 2008

In a sign of how far Britain is being hit by soaring inflation, new research by Chelsea Building Society shows that many people are having to use savings to pay for daily essentials including food, gas and electricity and even their mortgage or rent.

Whereas traditionally savings are built up for large special purchases such as cars, weddings and holidays, that appears to be changing rapidly, with one in seven people (15%) admitting that they have cashed in savings in the past three months to pay for utility bills or council tax. In addition, 14% have used savings to pay for food and one in eight (12%) have even used savings in the past three months to pay for their mortgage or rent.

Men are suffering more than women; with one in five saying they have recently used savings to pay for a utility bill and one in seven using savings to pay for their mortgage or rent.

Key pressure points where people have seen a noticeable increase in their spending in the past six months are food (64% agree), petrol (61%) gas/electricity (61%), and council tax (44%). And people are even gloomier about the outlook for the next three months, with four in five expecting to have to spend more on food and gas/electricity, seven in ten expecting to spend more on petrol and half expecting to spend more on council tax.

The research also paints a gloomy picture for suppliers of life's niceties - people expect to spend far less on gifts, holidays, home furnishings and home improvements over the next three months. Worst hit will be gifts and holidays, with almost half of people say they will spend less (53%, 51%). Four in ten will spend less on home furnishings and improvements (48%, 43%). Not surprisingly, the ability to save regularly will be hit: people intend to try and continue to save regularly, but men's monthly savings will be down by 24% (from £252 to £204) and women's down 8% (from £181 to £168)

Darren Stevens, Director of Customer Services at Chelsea Building Society, commented;
‘It is a completely new phenomenon for savings to be used for everyday expenditure on this scale. We are concerned that many people's finances are in real trouble due to the growing pressure of rising costs across so many essential items.

‘However, it is encouraging that people have not been deterred from saving all together. While times may seem tough to some, at the moment it is still vital that people continue in their habit of putting some money aside for long term savings. With sensible budgeting and cutting back on life's luxuries, any money saved can act as a cushion against any unexpected costs in the future or as a down payment for a holiday, a rainy day or treat once the current economic woes blow over!’

Table1: Reasons for using savings over the last three months

Table 2: Top five costs with a noticeable increase in expenditure

Table 3: Top five costs where Britons expect to increase their spending over the next three months

Table 4: Top four costs where Britons expect to decrease their spending over the next three months

Table 5: Average monthly amount saved by men and women and expected monthly saving over the next three months

Notes
* 1,050 UK residents were surveyed between 26 June and 4 July 2008 using an internet research tool.
They represent a variety of income brackets as well as regions.

For further information please contact:

The Wriglesworth Consultancy

Chelsea Building Society