New data from the British Bankers Association (BBA) shows that savings levels have fallen in the first six months of 2011 compared to the same time period last year.
The figures show that personal savings and deposits rose in the first half of 2011 by £6.1billion, less than half of the £15.9 billion rise for the same period last year.
The significant slowdown in the rate of saving is being mainly attributed to rising living costs, particularly gas and electricity prices.
The cost of running a car has also increased significantly with fuel prices rising during the first half of the year.
The BBA believes that money which would otherwise have been put aside in savings has been used on meeting day to day living costs.
“Personal deposits are growing only slowly as some people may be using savings to pay higher household bills,” said David Dooks, the BBA’s statistics director.
Low interest rates and inflation could also be a factor with people preferring to invest, perhaps in stock market related vehicles, rather than save in deposit accounts and receive a return below inflation.
A further factor could be that people are repaying lump sums from their mortgage rather than save in an effort to increase the amount of equity available in their home. Finally, the larger deposits needed for homebuyers to secure a competitive mortgage rate could be leading people to increase the size of their deposit by using money held in savings accounts.