New research by Egg, the digital provider of financial services, highlights an alarming decline in the amount of money Britons are saving for their financial future, with two thirds of homeowners claiming they intend to use the equity in their homes to secure their retirement.

• Homeowners take a gamble on house prices – 65% aim to use equity in their home for future spending.
• ‘Feel good factor’ of rising property values leaves two in five (40%) less concerned about saving for their future.
• Britons now save less than 5% of their income - half of what they saved in 1997

Jerry Toher, Managing Director of Egg UK says, “The boom in house prices is having a worrying affect on the level of saving by Britons. With the majority of homes now valued considerably higher than what they were purchased for, homeowners are feeling financially comfortable and ignoring the need to save elsewhere. This is a dangerous mindset to fall into: a drop in house prices could leave many homeowner’s futures financially exposed”.

This decline in savings appears to be a direct result of people’s own financial confidence, as booming house prices in recent years has offset falling stock markets. As a result, the nation’s homeowners have become less concerned about saving for the future and more confident in the potential of their home.

Two out of five homeowners feel less concerned about their savings now, mainly as a result of building up a large chunk of equity in their home. Homeowners are increasingly treating their home as an additional source of future income, two thirds of homeowners questioned said they plan to spend a proportion of the equity in their home in the future.

In 2002 each UK adult saved on average £826, this is in contrast to an equivalent £1,213 saved by each adult in 1997.

This scenario of Britons saving less when house prices are booming has a familiar pattern to it and can be seen during the last house price boom. Over the last 15 years during the two periods of high house price inflation, the nation was lulled into an ambiguous sense of security over their level of wealth.

In contrast in times of low or negative home inflation the percentage of earnings individuals saved was almost three times as high as they do currently.

Toher continues: ”Homes have proved to be an excellent investment over the past ten years, however to stop saving on the basis that your property has now become valuable is risky.”

“The best course of action is to keep saving – don’t rely too heavily on your home as an investment, house prices can go down and the latest data shows that for many people living the south east they probably are already”.

Egg’s internet savings account guarantee aims to encourage Britons to save more by promising to at least match Bank of England base rates until 2007, which they say is by far the longest guarantee by any UK instant access saving account.