One in ten households could cash in savings when interest rates rise - revealed by Legal & General MoneyMood Survey.
12 August 2011
The MoneyMood Survey from Legal & General has questioned savers about what they are likely to do if the Bank of England (BoE) puts up interest rates. The majority of households (53%) are likely to "do nothing". Around a third (35%) say they will "add to savings" and one in ten (11%) say they will "withdraw from savings".
Interestingly, the reason for withdrawing from saving is markedly different depending on whether they are paying off a mortgage. Over half (57%) of those with a mortgage say they will withdraw from savings "to pay the increase in mortgage payments". The main reason for needing to withdraw from savings for those with no mortgage was to "pay household bills" (45%).
MoneyMood Survey ®
The main reason for withdrawing from savings.
|Reason for withdrawing from savings||Total withdrawing from savings||Paying mortgage||No mortgage|
|To pay household bills (including food and utilities)||30%||11%||45%|
|To pay increased mortgage payments||28%||57%||2%|
|To pay for a holiday||12%||13%||11%|
|To afford Petrol/fuel/fares to work||6%||2%||10%|
|To pay off some credit card debt||6%||6%||6%|
Commenting on these findings Mark Gregory, Legal & General Executive Director Savings said; "Our latest research indicates that the BoE is right to hold off increasing in interest rates earlier this month (4 August). It is often assumed that increasing interest rates will encourage households to save more. Our research indicates that this may not always be the case. In the current economic climate with high inflation, higher fuel prices and rising food bills eating into household finances it appears that a rise in the BoE savings rate could push some households' savings down. The latest MoneyMood figures indicate that more than 2 million households (11%) say they will need to withdraw from savings if the Bank of England puts up interest rates. Around a third (34%) are mortgage payers, half of whom (57%) say they will use savings to meet their increased mortgage payments if rates go up. For the remaining two thirds (66%) it appears over half (55%) are already considering cashing in some savings to pay rising household bills and high fuel costs."
What households are saving for…
For those households (35%) that say they would "add to savings" recent MoneyMood surveys have indicated that the top things people are saving for are;
- Saving for a rainy day = 68 per cent (men = 72 per cent, women = 66 per cent)
- Saving for a holiday = 52 per cent (men = 53 per cent, women = 51 per cent)
- Saving to pay a household bill = 50 per cent (men = 49 per cent, women = 51 per cent)
- Saving for home improvements = 45 per cent (men = 41 per cent, women = 48 per cent)
- And saving in case you lose your job = 32 per cent (men = 40 per cent, women = 25 per cent)
Bottom of the list are;
- Saving for a new car = 18 per cent (men = 21 per cent, women = 17 per cent)
- Saving for a deposit on a new house = 13 per cent (men = 19 per cent, women = 10 per cent)
- And saving for a wedding = 11 per cent (men = 12 per cent, women = 10 per cent)
Mark added: "The focus of saving appears to be more about meeting short term needs such as paying households bills and more immediate concerns such as saving in case you lose your job. Not surprisingly the vast majority of households say they will "do nothing" when interest rates rise. Perhaps this is because, as our figures indicate, over half of homes in Britain (12 million) are budgeting on a fine balance between managing to pay bills and sinking into debt and so can no longer afford to save."
Notes to editors
Survey - methodology:
Research for the Legal & General MoneyMood Survey was carried out by TNS Omnibus. Telephone interviews were conducted among a nationally representative sample (in GB) of around 1,000 adults (age 18+) between 24 to 26 September 2010 and the 17 and 19 June 2011.
The Legal & General MoneyMood Survey ® (registered by Legal & General Group plc).
Legal & General Assurance Society Limited.
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For more information please contact:
PR Manager Savings
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