This comes in light of a report revealing the strategies consumers take to cope with high costs
Recent data gathered from Barclays current accounts indicates a notable trend: while housing costs in the UK continue to rise, the pace of growth has remarkably slowed down. The report highlights that spending on rent and mortgage payments increased by just 1.8% year-on-year in March, marking the lowest increase in a year. This is a stark contrast to the peak recorded in June 2023, where the increase reached 12.2%.
The findings shed light on the financial challenges faced by consumers, who are making strategic decisions to cope with the escalating costs of housing. As a result, household spending on non-essential items, such as electronics and DIY, saw a decline of 5.2% in March. Approximately one in 10 homeowners expressed concerns about meeting their monthly mortgage and rental payments. Also, nearly a fifth of respondents admitted to cutting back on expenses to keep up with the rising housing costs.
“Non-essential spending is still reeling from last year’s spike in housing costs, which caused both homeowners and renters to cut back while looking for additional sources of income – such as delaying renovations and renting out spare rooms,” said Mark Arnold, head of savings and mortgages at Barclays UK.
Retrofitting properties to control costs
The data reveals a proactive approach among homeowners to mitigate future financial strains. Approximately one in 10 homeowners are taking steps to retrofit their properties to reduce energy bills and protect against potential energy price shocks. Notably, retrofitting appears to be gaining traction among various strategies as a prudent investment choice.
However, challenges persist, particularly in the rental market, where a lack of supply has led to heightened competition among tenants. More than a fifth of renters feel they are receiving less value for their money due to this increased competition. Moreover, the cost of living poses significant barriers to saving for a deposit, with one in four renters citing it as the primary obstacle to homeownership.
Cautious spending observed
The broader economic landscape reflects the cautious consumer sentiment, as evidenced by a slowdown in discretionary spending. Retail and restaurant sales experienced a stall, with consumer card spending growth remaining flat in March. This trend has been attributed to factors such as inclement weather, which deterred foot traffic in retail spaces and hospitality venues.
Nevertheless, amidst these economic uncertainties, there are pockets of optimism. Cinemas witnessed a surge in spending following the release of blockbuster films like Dune: Part Two, indicating pent-up consumer demand for entertainment experiences. Additionally, pubs, bars, and clubs observed stronger growth, buoyed by events such as the Six Nations and FA Cup fixtures, as well as cultural celebrations like St. Patrick’s Day.
Looking ahead, there is cautious optimism regarding the UK economy’s trajectory. With expectations of interest rate cuts and reduced mortgage rates, coupled with initiatives aimed at promoting energy efficiency, there are indications that housing costs may transition from being a burden to a catalyst for increased consumer confidence and spending in the coming months.
“With an expectation that the Bank of England will cut interest rates from June, and banks responding by reducing mortgage rates, our research suggests that the housing costs that have been a drag on consumers for over a year are on the cusp of a turn, and will become a boost to spending from H2 and beyond,” said Jack Meaning, chief UK economist at Barclays.
Have something to say about this story? Leave a comment below.
