Consumer Pulse Q4 2022

Economic pressures

As the UK potentially slides from inflation into an official recession, consumers face growing headwinds; inflation hit 11.1% year-over-year in October,1 and the Bank of England continued to raise base rates. In response, consumers have clearly shifted gears from post-COVID growth to a recession preparation mindset. Among those surveyed, 39% indicated they’re actively building up savings, reducing spending (75%) and paying down debt (20%) in preparation for a recession.

Outlook improvement coincides with government support

Notably, government support packages appeared to coincide with a positive shift in those experiencing financial distress; 20% of respondents expected to be unable to pay any of their current bills and loans in full, down from 27% in Q2 2022. This sentiment may reflect increased consumer confidence and support flowing from the Energy Price Guarantee and government support packages introduced in recent months. That being said, the proportion experiencing financial difficulty remained concerning; 69% of consumers indicated they’d cancelled or cut back household spending in the past three months, and 46% were pessimistic about their household finances in the next 12 months.

Mortgage renewal concerns

There was great concern in the market for those reaching the end of their two, three or five-year fixed rate mortgages. In October, mortgage rates rose from 1.29% to 6.01%2 in the 12 month period, which means a significant and possibly unaffordable increase to monthly mortgage costs for many. This was reflected in the general concern sentiment of those with mortgages; 54% reported pessimism about their household finances over the next 12 months, higher than the 46% overall.

The cushioned population

Within the doom and gloom of higher cost of living, it’s worth keeping sight of the large portion of the population that remained financially stable and more than able to weather the storm. Among all respondents, 80% felt they would be able to pay all their upcoming bills and credit commitments in full; 17% reported an income increase in the last three months; and 29% expected an income increase within the next year.