Consumer spending on rent and mortgages rose by 5.7% year-on-year, and was up from a 1.5% increase in June, according to the latest Barclays Property Insights report.
However, rent and mortgage payments fell 3.8% month-on-month and Ofgem’s recent energy price cap reductions led to payments on utilities falling by 7.5%.
The report noted that there was no change in consumers’ confidence in being able to stay on top of rent and mortgage payments, which stood at 53%.
However, looking at the impact of rising costs, renters felt more exposed than homeowners, with 80% saying they were worried about rising housing costs’ impact on their personal finances. This was almost double the 43% figure for homeowners.
Renters were also less likely to have an emergency savings fund to cover unexpected bills, at 17% compared to 24%.
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Base rate cut has positive impact on consumer confidence
Barclays said that the Bank of England base rate cut last week had had a positive impact on consumer confidence, with 57% saying they felt more confident in their ability to live within their means and 51% feeling more confident about their household finances.
Around 27% of mortgage holders expected their monthly costs to fall in the future due to the base rate cut, while half anticipated no change due to the dominance of fixed rate mortgages.
Retail spending was struggling, with 39% saying that July’s rainy weather had curbed their summer spending, but 15% saying that staying inside had led them to make more home improvements.
Economic awareness growing among homeowners and renters
Barclays said that 88% of homeowners or aspiring homeowners were aware of the base rate, but over a quarter said they did not understand what it meant.
More than a third said they had never heard of the Monetary Policy Committee (MPC).
Half of respondents said they did not know what a swap rate was, which is used by lenders to price fixed rate mortgages.
However, around 15% of renters and mortgage holders said they were becoming more engaged with economic news given its impact on housing, especially younger people.
For mortgage holders, a third looked at news coverage for information, followed by consumer advice websites (27%) and mortgage providers (25%).
A fifth of 18-24-year-olds said they would go to friends and family, while 19% said social media was their main source of information.
Mark Arnold, head of savings and mortgages at Barclays, said: “The base rate reduction on 1 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.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Rising mortgage costs offset by energy bills and base rate cut fuelling consumer confidence
