Consumers `shunning loans in favour of savings`

As fears surrounding personal finance problems rise in the UK, consumers are increasingly shunning loans in favour of saving their cash.

This is according to the Building Societies Association (BSA), which released figures earlier this month suggesting that building societies received deposits worth £1.4 billion in July this year - a noticeable rise on the same month last year, when savers stashed away only £723 million.

Adrian Coles, director-general of the organisation - which serves to represent and provide information to its members - said that the trend could be a symptom of growing consumer concerns about debt in increasingly uncertain market conditions.

He said: "A turbulent stock market and greater anxiety over job prospects mean that people are increasingly viewing their tried and trusted building society as an excellent home for their money."

The BSA`s figures also revealed that mortgage providers have been more conservative over the amount they lend to consumers, in news which may be of particular interest to people seeking to remortgage their properties.

According to the association, gross lending from such financial service providers amounted to £3.3 billion in July, a decrease of £1.1 billion from the same month in 2007.

Making reference to the trend, Mr Coles commented: "With societies seeking to maintain high quality loan books, societies have chosen to follow a policy of conservative lending that has further reduced the amount of mortgage business they have undertaken."

In a bid to stimulate the property market in the face of the UK`s current banking problems, the government has introduced a new loan scheme to help first-time buyers in England who may be concerned about clearing debt.

Under the scheme, people looking to get on to the property market and who have a household income of less than £60,000 are eligible to apply for finance.

The Labour administration anticipates that up to 10,000 first-time buyers will be able to take advantage of the offer.

Meanwhile, other research published this month suggested that, despite being prepared to haggle over the price of goods such as cars and televisions, consumers in the UK are reluctant to enter into negotiations over financial services such as loans.

Conducted by CreditExpert.co.uk, the study found that only 16 per cent of survey respondents would be happy to try and talk lenders into offering better deals.

This is despite the fact that consumers are increasingly feeling the pinch financially, with a recent Prudential survey suggesting that the "vast majority" of consumers are worried about the effects of price inflation on their personal finances.

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