Consumer confidence is up, demand is high – it's time to make hay while others party
Consumer confidence has continued its recovery after an earlier dip sparked by concerns ahead of the budget, with a leading City analyst suggesting that fears about the economic impact of Rachel Reeves' tax hikes have been overstated. Add in the fact that the stamp duty threshold is set to change in March, and suddenly we’re looking at what could be a mortgage hunting rush over the next few weeks.
GfK, a market research firm, has reported that its household sentiment index edged up by one point to -17 in December. This follows a three-point rise in November, placing confidence levels well above where they stood before the October 30 budget announcement. The index had registered -20 in September and worsened slightly to -21 in October.
The findings highlight growing optimism among consumers regarding their personal finances over the next 12 months, as well as an increased readiness to dip into savings to boost spending.
And in more good news, Finance UK has just released a report predicting that mortgage lending for home purchases will rise by 10% next year.
One important outcome from all this, is that there is a current surge of potential clients – who aren’t necessarily going to stop house hunting just because it’s the Christmas season. “Bear in mind we've got the stamp duty thresholds changing at the end of March, but so I'm getting a lot of enquiries even now,” Amy Kadir from Lonsdale Mortgages told Mortgage Introducer. “Normally December is a very quiet month for me and I think in general in the industry, but I've got a couple of people that have had offers and they're offering - and then we just want to get it moving before that stamp duty threshold changes.”
Research from property group Lomond backs this up. Its survey showed 82% of respondents planned to continue house hunting up to Christmas, while 74% say they will also search between Christmas and New Year. “The adjustments approaching in March 2024 are proving to be strong motivators for house hunters as we close out the year,” chief executive Ed Phillips said. “So much so that many are prepared to pursue their plans to purchase right up to, and over, the Christmas period.”
The rush may not be equal across the whole country – “I think our advisors that are in the North and the Midlands are probably busier and having more mortgages being written than some of our advisors in the South and London where I think just the cost-of-living is being felt a lot more,” Sarah Tucker from The Mortgage Mum told Mortgage Introducer. She shares the positive feeling that GfK are reporting on though. “I think 2025, for me, feels a lot more optimistic and I think we're going to see a lot more activity.”
Concerns remain that Reeves’ policies will contribute to persistently high inflation, with businesses expected to pass tax-related costs onto consumers. The budget also included a 6.7% rise in the minimum wage and a sweeping overhaul of workers’ rights. The hike in employers’ NICs, set to rise from 13.8% to 15% next April, is particularly contentious.
Bank of England data revealed that over half (54%) of businesses plan to raise prices to counteract the higher national insurance costs, while 59% indicated they would absorb the hit through reduced profit margins. Andrew Bailey, Governor of the Bank of England, has said that potential interest rate cuts in the near future will hinge partly on how businesses respond to the NIC rise. The Bank’s monetary policy committee is anticipated to hold rates steady at 4.75% during its upcoming meeting.
Consumer confidence has been fragile over the past two years as soaring interest rates were introduced to combat inflation, which had hit a 40-year high. Official figures due next week are expected to show that inflation climbed to 2.6% in November, up from 2.3% in October.
However, while households show signs of renewed optimism, business sentiment has taken a significant hit. Direct tax increases under Reeves’ budget largely target companies, leading to falling hiring intentions. The latest data from KPMG and the Recruitment and Employment Confederation indicated job vacancies are declining at their fastest rate since August 2020.
Whatever next year brings, maybe we should follow Gordon’s advice - skip lunch and gather as much business as we can while everyone else slows down for the festive season.
