Consumers in the UK are focusing on paying off their debts rather than saving, according to new research.

The Markit UK Household Finance Index found that UK residents were choosing to pay off their current debts rather than lock their cash away in savings and ISAs, except those earning more than £57,571.

Low interest rates, as well as the prospect of large scale job losses in the public sector, increases in VAT and rising inflation, has led a wider focus on debt reduction.

That theory was supported by overall debt figures, which recorded lower levels of debt for the eighth month in a row.
“Concerns over pay and job security remain at the forefront of people’s minds, while stubbornly high inflation and an impending VAT rise are becoming increasingly difficult to ignore,” said Markit economist Tim Moore.

“Those working in the public sector reported the greatest degree of pessimism, perhaps because of a sense of unease ahead of next month’s government spending review.

“Households have responded to the uncertain outlook by paying down debt, reining in their appetite for unsecured credit and delaying major purchases.”

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