As the UK wrestles with economic pressures, new data sourced from millions of Barclays current accounts reveals a significant uptick in spending on rent and mortgages, climbing by 6.3% year-on-year in May. This rise outpaces April’s increase of 3.6%, signaling a sustained upward trend in housing costs. Despite this, there’s a glimmer of optimism as falling inflation and energy prices, along with a boom in home improvement spending, suggest a potential recovery for the housing sector.
Economic Context
The recent data release coincides with broader economic developments. Consumer confidence has been shaken by increasing household bills, particularly in sectors like broadband and council tax. However, the latest inflation figures bring some relief, with 62% of consumers feeling more capable of living within their means, and 56% expressing increased confidence in their household finances. Additionally, sentiment about the UK housing market’s strength has seen a modest rise, from 25% to 27%.
The Housing Market’s Challenges
Despite the mild boost in market confidence, the challenges remain stark. The increase in housing expenses compared to 2023 is stark, though the month-on-month change was negligible, indicating that immediate consumer sentiment might not be severely impacted—especially considering the reduction in the Ofgem energy price cap in April, which led to a 12.5% drop in consumer utility spending in May.
Homeownership remains a pivotal goal for many. About 10% of individuals who have never owned property feel pressured by societal expectations to buy a home. The cost of a deposit stands as the most significant barrier, cited by 30% of potential first-time buyers, while 18% are postponing their plans due to high interest rates.
The Rental Perspective
The flexibility of renting continues to appeal to a segment of the market, with 15% of renters valuing this over homeownership. Additionally, 12% of consumers prefer renting due to their low confidence in the housing market’s robustness, questioning the traditional view of property as a secure investment.
Support from the Bank of Mum and Dad
The generational divide in financial support for property purchases is notable. Only 10% of over 55s received help from their parents, compared to 19% of 18-34-year-olds, reflecting changing economic circumstances and the increasing difficulty of stepping onto the property ladder without family assistance.
Spending Shifts
Amid retail sector struggles, there’s a silver lining as spending on home improvement shows signs of recovery. Furniture stores and DIY outlets saw improved performances in May, likely boosted by consumers taking advantage of the early May bank holiday to enhance their living spaces.
Conclusion
Mark Arnold, Head of Savings and Mortgages at Barclays, comments on the resilience and challenges ahead: “Our latest spending figures show that rent and mortgage payments continue to pose significant challenges for consumers. However, there are encouraging signs of improvement ahead, with falling inflation and potential interest rate cuts providing a beacon of hope. Many lenders are now offering creative solutions, such as the Barclays’ Springboard mortgage or Kensington Mortgages’ flexible lending criteria, to help first-time buyers overcome barriers to homeownership.”
As the UK economy navigates through these turbulent times, the path to recovery appears visible but requires careful navigation and supportive policies to ensure sustainable growth in consumer spending and the overall economic health of the nation.
