"It’s encouraging to see consumers staying on top of financial news, so they can be empowered to make the best financial decision when the time comes."
- Mark Arnold, head of savings and mortgages at Barclays
Consumer spending on rent and mortgages increased by 5.7% year-on-year in July, which was a noticeable jump compared to June’s more stable growth of 1.5%, the latest Barclays Property Insights report reveals.
That said, rent and mortgage payments declined by 3.8% month-on-month, and Ofgem’s recent energy price cap reductions caused spending on utilities to fall 7.5%. As a result, there was no change in consumers’ confidence in being able to stay on top of rent and mortgage payments (53%).
Encouragingly, the Bank of England base rate reduction on 1st August has had a positive impact on consumer confidence. Nearly six in 10 (57%) say it made them feel more confident in their ability to live within their means, and just over half (51%) feel more confident about their household finances. Three in ten (27%) mortgage holders expect their monthly costs to decrease in the near future as a result of the base rate reduction, while half (50%) anticipate no change, likely due to the prevalence of fixed rate mortgages.
Looking at the impact of rising costs, renters feel much more exposed than homeowners. Eight in 10 (80%) renters say they’re worried about the impact of rising housing costs on their personal finances, which is nearly double the rate for homeowners (43%). Renters are also less likely to have an emergency savings fund to cover unexpected bills (17% compared to 24%).
Despite most Brits either owning a home or aspiring to be future homeowners, consumers are less familiar with the factors that influence mortgage rates. Whilst 88% of people are aware of the Bank of England Base Rate, over a quarter (26%) report that they do not understand what it means, and over a third (35%) have never heard of the Monetary Policy Committee (MPC). Swap rates (which are an indication of where the base rate will be in future and help determine pricing for fixed-rate mortgages) are even less well recognised, with half (49%) having never heard of them.
That said, there are signs that Brits are investing more time into understanding how the market works. Nearly one in six renters and mortgage holders (15%) say they have become more engaged in news around the UK economy in the last year, given the impact on their housing costs, particularly amongst 18-34-year-olds (22%).
For mortgage holders, news coverage was the top source of information selected (31%) for where to seek more information about how the Base Rate impacts their mortgage, closely followed by consumer advice websites (27%) and mortgage providers (25%). A fifth of 18-34-year-olds (22%) said they go to friends and family, and a fifth (19%) cited social media as a main source of information. In contrast, these sources were only selected by 4% of over 55s.
Mark Arnold, head of savings and mortgages at Barclays, said: “The base rate reduction on 1st August was certainly a promising sign for UK homeowners and the wider economy, with over half of consumers saying it made them more confident in their household finances.
“However, it’s important to remember that unless you’re a homeowner on a variable or tracker mortgage, it may be some time before you notice a tangible difference in your monthly bills. For example, those on fixed rate mortgages will need to wait until they roll off or remortgage to determine whether their repayments will rise or fall, and for renters there’s even less of a clear cause and effect when it comes to pricing.
“Whilst it’s by no means mandatory for homeowners to understand the inner workings of the mortgage market, it’s encouraging to see consumers staying on top of financial news, so they can be empowered to make the best financial decision when the time comes.”
